Australia & New Zealand Banking Group Ltd. expects the State Bank of Vietnam to devalue the official exchange rate 4 percent by year-end to VND18,500 against the dollar.

Foreigners are shunning Vietnamese bonds out of concern the government will let the currency weaken, Indochina Capital Advisors Ltd., a Ho Chi Minh City-based fund manager, said last week.

Vietnam wants to increase exports, Giau told the nation’s National Assembly Tuesday. The currency has weakened 2.2 percent so far this year, helping to boost competitiveness. Exports fell 14 percent through October from the same period last year.

“We will manage monetary policy in a flexible way,” Giau told lawmakers Tuesday. “But we don’t plan to devalue the dong.”

Vietnam’s currency depreciated to 17,873 against the dollar as of 11 a.m. Tuesday in Hanoi, from 17,872 yesterday and 17,483 at the end of 2008.

Last week at money changers in Ho Chi Minh City, the dong weakened as far as 20,000 per dollar, according to a telephone information service run by Vietnam Posts & Telecommunications.

Vietnam’s year-on-year inflation rate quickened to 2.99 percent as of October, increasing pressure on the central bank to raise interest rates. Inflation is likely to reach 6 percent this year, Giau said, without specifying if he was referring to a year-on-year or average rate.

“We don’t plan to tighten monetary policy by the end of the year,” Giau told the National Assembly.

Source: Bloomberg