Asia FX

Vietnam devalues dong again after posting trade deficit

Danita Delmont | Getty Images

Vietnam devalued the dong currency for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit.

The move had been widely expected after Vietnam recorded a $3 billion trade deficit in the first four months of the year, compared with a surplus of $2 billion in the same period last year.

The central bank said it had lowered the mid-point rate for the currency on the interbank market by 1 percent to 21,673 dong per dollar.

Dollar/dong transactions can move in a band of plus or minus 1 percent around the mid-point, which the central bank sets daily.

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"The market had expected this change right after the government released data on the trade deficit," a money market dealer at a Vietnamese bank in Ho Chi Minh City said.

The previous depreciation was on Jan. 7, when the central bank also weakened the dong by 1 percent to help stabilise the foreign exchange market.

The State Bank of Vietnam said in a statement that recent pressure on the dollar/dong rate was "psychological" and "in market expectations", saying its latest move was to help meet socio-economic targets and cope with negative impacts from global markets.

"The (market) expectation is more depreciation as the dong is down just 2 percent while other currencies in the region have fallen 4-5 percent now," he said.

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Last December, central bank Governor Nguyen Van Binh said it would keep the dong depreciation to less than 2 percent for the whole of 2015.

After Thursday's adjustment, the dong fell to 21,650/21,730 per dollar on the interbank market, from 21,620/21,670 the previous day.

Vietnam's January-April exports rose 8.2 percent to an estimated $50.1 billion, while imports surged 19.9 percent.

The government has projected annual export growth of 10 percent for the whole of 2015, slowing from a rise of 13.7 percent last year.