Vietnam's latest devaluation of the dong isn't a new shot fired in an Asian currency war, just the country catching up with regional peers that have already seen their currencies plunge, analysts say.
The State Bank of Vietnam (SBV) devalued the dong (VND) by 1 percent against the dollar on Wednesday—its third adjustment so far this year—and simultaneously widened the trading band to 3 percent from 2 percent previously, the second increase in six days.
"The prima facie evidence sensationalist headlines about Vietnam upping the ante on currency wars may be tempting, but we politely refute such allegations," Vishnu Varathan, senior economist at Mizuho Bank, said in a Wednesday note.
Indeed, Vietnam's aggressive move has been widely interpreted as a blatant attempt to keep its exports competitive in the wake of China's historic 2 percent currency devaluation last week.
Beijing is Ho Chi Minh's largest trading partner, with Vietnamese exports to China rising 3.6 percent on year to $7.7 billion in the first half of 2015. Both countries are low-cost manufacturing hubs and compete for investment from foreign companies, so a weaker yuan makes Vietnamese goods more expensive in comparison.
"Admittedly, this [dong devalulation] is a significant deviation from perceived FX policy guideline. But the reality is that the SBV is merely beginning to align with brutal Asia-ex Japan (AXJ) shifts," Varathan added.
The dong has depreciated nearly 5 percent so far this year, but Varathan notes it still hasn't closed the gap with most other ASEAN currencies. In comparison, Thailand's baht has dropped 8 percent, the Indonesian rupiah has lost 12 percent and Malaysia's ringgit is 17 percent lower.