Vietnam devalues for third time this year, drops Dong by 1%

HO CHI MINH CITY - The State Bank of Vietnam has raised its USD/VND Reference rate by 1% to 21,890/USD in the third adjustment this year. The trading band was widened yet again to +/-3%, allowing the currency to trade within a 21,233-22,547 range.

ANZ Bank says the adjustment will further ease pressure on the central bank to intervene in the currency market and depleting foreign reserves, currently at USD37 billion.
The “double” policy move by the SBV today closely followed the band widening last week to 2% from 1%, in the wake of China’s yuan devaluation. ANZ says that even in the absence of further policy adjustments over the rest of the year, the VND could depreciate by a maximum of 5.1% this year (4.5% year-to-date) vs annual depreciation of around 1.3% in the previous two years.
“We would note, from an economic perspective, that the Vietnamese Dong has been one of the more resilient currencies amidst the EM Asia currency downdraft of recent months,” ANZ says.  “Some re-alignment of the currency therefore seems warranted from a macro-balance perspective. Vietnam is not actively participating in a currency war or a race-to-the-bottom as some headlines may suggest.”  www.live.anz.com (ATI).