Central bank devalues dong by 9.3 percent

State Bank of Vietnam Friday announced to depreciate Vietnamese dong by 9.3 percent against US Dollar and cut down the gap of rate fluctuation to 1 percent from 3 percent, aiming to ensure the high liquidity of the foreign exchange market and control the trade deficit.

The new exchange rate is effective from Feb 11.

As a result, the exchange rate of US Dollar ruled by commercial banks is 20,900, an increase by VND 1,400 compared to yesterday.

This is the highest increase of the exchange rate of Vietnamese Dong vs. US Dollar in the Vietnam’s currency history.

The bank said the increase was aimed at positively regulating the exchange rate, meeting demand of foreign currencies, ensuring high liquidity of the foreign exchange market, bringing a lasting improvement to Vietnam's gaping trade deficit and supporting the more flexible and  positive monetary policy.

Commenting on the bank’s decision, Head of Business Administration Faculty of the HCMC Bank University Le Tham Duong said that the amendment was likely strong but this is a consequence of keeping the exchange rate unchanged for a long time.

The bank should raise the exchange rate several times, he said.

However, the Government would like to stabilize the macro economy hence the bank had not changed the rate, he explained.

Mr Duong said that the amendment was adequate and right reflected supply and demand of US Dollars in the market.

Together with measures to cut down the excess of import by the Government, the increase of the exchange rate may help stabilize the rate for a long time, he added.

Today's amendment is the third and most significant move by the central bank since February last year. On February 10, Viet Nam depreciated the dong by 3.3 per cent and made another devaluation of 2.09 per cent on August 18 last year.

The flutuation gap of 3 per cent daily trading band had been in place since November 2009. The widest trading band the central bank ever applied was plus/minus 5 per cent from March 24 to November 25, 2009.

By Hong Nga-Translated by Dan Que

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