Vietnam sets dong fix rate at record low amid US dollar strength

Published Thu, Nov 7, 2024 · 01:54 PM

VIETNAM set its reference rate for the dong at a record low, setting the stage for more weakness in the South-east Asian nation’s currency as the US dollar’s surge pummels emerging markets.

The State Bank of Vietnam (SBV) set the currency fixing at 24,283 dong per US dollar on Thursday (Nov 7), the weakest since at least 2005, according to data compiled by Bloomberg. The dong was little changed at 25,402 per US dollar on the day, about 0.3 per cent away from a record low.

“SBV is likely to allow the dong to gradually weaken over time, hopefully in a orderly fashion,” said Michael Wan, a currency strategist at MUFG Bank in Singapore. “But it wouldn’t want the weakness to be too sharp, and it will definitely be ready to intervene to prevent that.”
Asian central banks are adapting to a strong US dollar world after Donald Trump’s election win this week fuelled a rally in the greenback, with the South Korean won tumbling to a two-year low. China on Thursday slashed the daily reference rate for its currency to a level unseen since late 2023, a sign the central bank is also allowing depreciation.

SBV officials were not immediately available to comment when contacted by Bloomberg News. The central bank allows the dong to trade within a band of 5 per cent on either side of the reference rate, which is based on eight currencies and is set every day.

The dong has slumped more than 4 per cent against the US dollar this year, on track for its worst annual performance since 2015.
“This situation underscores the central bank’s ongoing task of building up foreign exchange reserves,” Pham Luu Hung, chief economist at SSI Securities in Hanoi, wrote in a note. “Additionally, it may prompt the central bank to allow greater flexibility in exchange rate movements to foster a deeper forex market.” BLOOMBERG