Vietnam May Devalue Currency Next Year

Posted by Reading Time: < 1 minute

Dec. 10 – Next year, Vietnam's currency may be devalued because of slipping exports, deteriorating balance of payments and bank debts.

"The exchange rate now is overly high in Vietnam and the government should ease the rate a little bit to support exports," Le Dang Doanh, a research fellow at the independent think-tank Institute of Development Studies, was quoted as saying by the Reuters during a conference.

He said that the dollar/dong exchange rate should have been lowered to VND17,000 or VND18,000 per dollar, compared with an interbank rate of 16,977/16,987.

The State Bank of Vietnam recently widened the daily band to 3 percent either side of a fixed mid-point it sets each day to allow the dong to move.

"A devaluation is inevitable," Stewart Newnham, vice president of Morgan Stanley's research unit in Hong Kong was quoted by Reuters. He said Vietnam has been borrowing heavily abroad with debt now accounting for 25 percent of gross domestic product, the second highest rate in Asia after the Philippines.

The non-convertible dong has lost 6 percent so far this year against the dollar, he added.

Vietnam's central bank said it maintain its tightening policies to control inflation next year while still allowing flexibility in terms of market developments.