The State Bank of Vietnam devalued the dong for the second time this year in a bid to maintain export competitiveness.
A woman cycles past the building of the State Bank in Hanoi, Vietnam May 7, 2015. Vietnam devalued the dong currency for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit. Photo: Reuters
The central bank cut its reference rate 1 percent to 21,673 dong a dollar, effective Thursday, it said in a statement. The Vietnamese currency is allowed to trade as much as 1 percent either side of the daily fixing, which was also lowered by 1 percent on Jan. 7.
The exchange rate was adjusted “to proactively implement social-economic development targets,” the central bank said in the statement. Governor Nguyen Van Binh said in December that the dong wouldn’t be weakened more than 2 percent in 2015.
“It’s not really a surprise because the currency has been trading at the top side of the band,” said Irene Cheung, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The devaluation is not a bad thing because there is some deterioration in the trade balance.”
The dong was little changed at 21,652 a dollar as of 8:39 a.m. in Hanoi, according to data compiled by Bloomberg.
Vietnam has lowered the mid-point rate for trading its currency on the interbank market by 0.99 percent to 21,673 dong per dollar on Thursday, the central bank said via its data feed on Reuters Eikon system, its second depreciation this year.
The State Bank of Vietnam has yet to issue any statement on the adjustment, which has been widely expected after Vietnam recorded a $3 billion trade deficit in the first four months, compared with a surplus of $2 billion in the same time last year.
The previous depreciation was in January when the central bank weakened the dong by 1 percent to 21,458 dong per dollar to help stabilise the foreign exchange market.