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Vietnam dong US dollar exchange rate future

06.05.08 | admin | In Vietnamese

The State Bank of Vietnam, the central bank, set the dong’s official exchange rate at 16,099 per dollar Tuesday, the lowest level since January 28.
In the offshore market, the non-convertible dong eased to VND22,150 – VND23,150 per dollar on one-year term, implying the currency will be worth 39.3 percent less in a year’s time.

Although this isn’t a post on learning the Vietnamese language it should be of interest to those foreigners in Saigon who are learning Vietnamese. Especially Americans. The Vietnam dong is one of the few currencies that has depreciated against the dollar. Right now Vietnam is experiencing a high inflation rate of around 25% and the government wants to keep exports to the US competitive by keeping the dong undervalued. But the official exchange rate is out of balance with the open market rate. In recent days a rate of 17,750 Vietnam dong to one US dollar have been seen on the black market. Yet if you go to the bank to exchange dollars for dongs you’d only get around one US dollar for every 16,100 dong.

Banks in Vietnam are allowed to trade the currency within a band of plus or minus 2% per day. But economists are forecasting that the Vietnam dong will continue to devalue against the dollar.

So what should people be holding, dollars or dongs? Right now if you have dongs you can open a savings account with an interest rate of up to 15% which is up from around 12% a few weeks ago after the government uncapped the rate banks are allowed to offer. But if you’re deposit is in dollars you will only get 6% which is unchanged from when interest rates were uncapped. So right now if you have $100 you will get 1,610,000 Vietnam dong and after one year in the bank you would have 1,851,500 dong. But if you instead put the $100 in the bank after one year you would have $106 which could be worth between 2,347,900 and 2,453,900. But that’s only if the government allows the dong to be devalued that much, nearly 40% in a year. But if the government only allows a change of 2 to 3% then it’s much better to have your money in Vietnam dong in a savings account earning 15%.

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« Vietnamese alphabet pronunciation, spelling words out loud
» Differences in the difficulty and time required to learn different languages