Quick Update: Vietnam devalues its currency11 February, 2011, 11:56. Posted by Zarathustra
Tags: Currency, Dong, Inflation, Vietnam
Vietnam’s Central devalued its currency. The new fixed rate will be 20,693 dong per US dollar, down from 18,932 dong per US dollar, while narrowing the trading band from 3% to 1%.
Inflation in Vietnam has reached 12.17% on January 2011 compared to a year ago according to the General Statistics Office of Vietnam. On the surface, devaluing its currency doesn’t sound like a very wise move for a country with such a high inflation rate. However, foreign reserves are reported to be falling since 2009 amid large trade deficit. Devaluing the currency may help to stimulate growth and narrowing the trade deficit. And Singapore’s Straits Times is quick to point out that visiting Vietnam for a weekends getaway will now be cheaper after the devaluation.
Although the move seems to be anticipated, there’s a slight horror here. Big trade deficit and dwindling foreign exchange reserves seem to be what people now attributed as the cause of the Asian Financial Crisis in 1997. Nothing too serious now, but it is good to note.
More on Vietnam:
WSJ: Vietnam Dong Devaluation Supports Negative Ratings Outlook – Moody’s have an negative outlook on the country