VietNamNet Bridge – The State Bank of Vietnam (SBV) unexpectedly devalued the dong by one percent starting on January 7, 2015. It will now have the right to devalue the dong again by only one percent within the year.

The decision on adjusting the dong/dollar exchange rate was released in late afternoon of January 6, after many workers left the office. However, the depreciation of the dong has not surprised analysts, because it was believed to be “inevitable”.

The move, as commented by Bloomberg, aims to stimulate exports and foster growth.

The newswire quoted Alan Pham from VinaCapital, an investment fund, as saying that the dong has been put under difficult pressure, and that the central bank has tried to ease the pressure on local currency.

The expert thinks that the demand for dollars tends to increase as the Lunar New Year is coming (February 2015), since importers need more dollars to make payments for imports.

He commented that the SBV move is necessary and beneficial to exports.

The decision on the dong devaluation immediately triggered a price valuation of gold and dollar in both the official and black markets.

Thoi Bao Ngan Hang reported that Vietcombank, the biggest foreign exchange trader, on the morning of January 7 quoted the buying price at VND21,450 per dollar and the selling price at VND21,510 per dollar, which represent increases of VND75 and VND105, respectively, from the prices of the day before.

The highest buying price in the market on that day was 21,450 per dollar, and the lowest buying price was VND21,410. The highest selling price was VND21,510 and the lowest was VND21,500.

The price levels quoted by commercial banks have nearly hit the ceiling price. With the current official dong/dollar exchange rate of VND21,458 per dollar and the trading band of one percent (i.e., the prices set by commercial banks can be one percent higher or lower than the official rate at maximum), the price range commercial banks can set is between VND21,243 and VND21,673 per dollar.

The Governor of the State Bank of Vietnam, Nguyen Van Binh, stated at a banking conference held on December 24, 2014 that the dong would be devalued by no more than 2 percent in 2015.

As the bank has devalued the dong by one percent already, it would have the “devaluation quota” of one more percent only in the remaining months of the year.

On June 18, 2014, the dong/dollar official exchange rate was adjusted to VND21,246 per dollar, i.e the dong lost one percent of its value.

CV