Vietnam widens currency trading band to allow more FX volatility

HANOI - The State Bank of Vietnam (SBV) has widened the trading band of the VND to 2% from 1%, citing China’s yuan devaluation. After the announcement, the VND weakened 0.96% with USD/VND at 22,040, 0.3% below the upper bound of the new band (21,240-22,106).

ANZ Bank believes the move will provide room for the USD/VND to trade higher without putting pressure on the central bank to intervene.
“That said, given uncertainty over the CNY, we cannot rule out further pressure on the VND. With the current account deficit likely to widen, a slightly larger devaluation (compared to recent years) may be needed to avoid depleting foreign reserves.
“We put our USD/VND forecasts (currently at 22,050 at end-2015) under review, but given the evolving situation in the yuan, we await more clarity in the latter to finalise our forecasts.” www.live.anz.com (ATI).