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Vietnam dong currency crisis?

07.03.08 | admin | In currency, Vietnamese

The Vietnamese dong has already devalued by around 10% this year but some analysts expected to drop even more. Morgan Stanley is warning of a Vietnamese currency crisis. Last week one US dollar could be exchanged for nearly 19,500 Vietnam dong on the black market at jewelry shops but it’s dropped to around 17,500 now. And many places that quote prices in dollars such as travel agencies want payment in dollars or into equivalent black market rate. And using a credit card doesn’t help because the Vietnamese businesses get paid by the credit card banks at the official exchange rate when the currency is converted so they want an even higher amount for credit card transactions.

The Vietnamese Central Bank doubled the trading band from 1% to 2% where banks are allowed to trade the dong. But the government made another move as well. They have banned currency trading in currencies other than the US dollar. Before you could convert dongs into other major currencies like the euro or the Japanese yen which were convertible again into dollars but no more.

With banks no longer selling dollars, real estate down, the stock market in Vietnam the worst performing in the world, and gold selling at a premium with imports of gold now being suspended into Vietnam, what’s an investor to do? If you’re going to hold on to your dong you might so put in the bank at nearly 20% annual interest rates.

Last time on Vietnamese dong devaluation

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« Vietnamese dong devalued to fight inflation
» Typing in Vietnamese on your computer