Vietnam should pay attention to the "widening" gap between black market and official exchange rates, which can be considered a barometer of investor confidence, according to the Asian Development Bank.
"We certainly need to keep watching," Ayumi Konishi, the ADB's country director for Vietnam, said at a press conference in Hanoi. The "trend certainly reflects people's expectations."
Vietnam's dong is about 1.8 percent cheaper to buy in the black market than the official rate paid by banks and devaluations are likely in 2011 to bring the exchange rate into line, Credit Agricole CIB said in an Oct. 11 research note.
While other Asian countries like China or Thailand are worried about appreciation, the concern in Vietnam is "sharp devaluation rather than any gradual adjustment in the value of the dong," said Jayant Menon, an economist in the Office of Regional Economic Integration at the Manila-based ADB.
The dong traded between 19,830 and 19,870 per dollar at money changers in Ho Chi Minh City on Friday afternoon, according to a telephone information service run by state-owned Vietnam Posts & Telecommunications. The rate in the interbank market was 19,499, the weakest level since at least 1993, according to data compiled by Bloomberg.
The State Bank of Vietnam fixed the reference rate at 18,932 on Friday, a level unchanged since Aug. 18. The currency is allowed to fluctuate up to 3 percent on either side of the rate, which means it can be traded at low as 19,500.
"Vietnam is running a trade deficit so some sort of controlled depreciation of the currency to improve competitiveness is not a bad idea," Menon told reporters after the conference. "The concern is sudden sharp, erratic falls in the value of the dong, caused by lack of confidence."
Vietnam's cumulative trade deficit in the first nine months reached $8.58 billion, according to the General Statistics Office. For September alone, the gap rose to $1.05 billion from $395 million in August.