Financial Time Vietnam devaluation fails to stem dong’s fall

Vietnam must have hoped that Tuesday’s devaluation of the dong would stem the downward pressure on the currency, but on Wednesday it was trading even lower on the black market suggesting the possibility of further devaluations.

The central bank moved to devalue the dong by two per cent to 18,932 against the US dollar in a bid to stem the country’s ballooning trade deficit. On Wednesday, however, the dong traded even lower in the black market, falling to 19,480 from 19,320 the previous day.

Earlier this week, a gap opened between the commercial bank rate of 19,100 to the dollar and the black market rate, which hit 19,260 on Tuesday. The central bank hoped the devaluation would close the gap, but instead the black market rate continued to fall.

Vietnam’s trade deficit hit $7.4bn in the first seven months of this year, double the rate for the same period last year. Economists said the continuing pressure on the dong indicated that Vietnam’s trade deficit would continue to expand, and that the economy might have trouble meeting World Bank growth forecasts of 6.5 per cent for the year. More...