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Vietnamese dong devalued to fight inflation

06.11.08 | admin | In Vietnamese

Here’s an update on the Vietnamese dong to US dollar exchange rate.

Vietnam effectively devalued its currency by almost 2% Tuesday to bring official exchange rates closer to black-market rates, which have fallen sharply as Vietnamese investors buy dollars to escape soaring inflation.

All this after Prime Minister Nguyen Tan Dung said that the government wasn’t going to devalue the currency.

In a statement on its Web site, the State Bank of Vietnam said it will set Wednesday’s official exchange rate at 16,461 dong per dollar, from 16,139 dong on Tuesday.
But black-market rates for dollars have been increasing, and one dollar now buys 18,000 dong to 18,500 dong — as much as 15% more than Tuesday’s official exchange rate.

The State Bank of Vietnam (SBV) said Tuesday it has raised the benchmark rate by 2 percent to 14 percent per year to battle the accelerating inflation, which reached 25.2 percent in May.

The central bank last month boosted the base rate from 8.75 percent to 12 percent.
That means that those of us in Vietnam who are getting paid in US dollars just saw a 2% raise. 2% here or there can happen all the time but maybe this will just be the first raise in a series of raises by the Vietnamese government to devalue the Vietnamese dong. There is still a long way to go before matching the black-market rates or the non-convertible offshore forwards. Goldman Sachs thinks that dong is overvalued. Meanwhile Vietnam’s benchmark stock index has been falling for 25 straight sessions making it the worst performing stock market in the world.

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