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Vietnam devalues its currency by over 5 percent76 days ago
(AP:HANOI, Vietnam) Vietnam announced a 5 percent devaluation of its tightly controlled currency Wednesday, succumbing to pressure for a weaker dong as foreign reserves dwindle.
A statement on the State Bank of Vietnam's web site said that from Thursday the dollar will buy 17,961 dong _ a devaluation of 5.4 percent from the current rate of 17,034 dong per dollar.
It was the third devaluation of the dong in less than two years and suggests Vietnam's large trade deficit is making it difficult for officials to keep the currency stable.
The VnExpress Web site quoted State Bank governor Nguyen Van Giau as saying this "prompt and strong intervention measure" aims to stabilize the foreign exchange market which is very tense.
Many economists say Vietnam's currency is kept artificially high and would fall steeply without the central bank's tight controls. The central bank has to sell dollars and buy dong to keep the exchange rate at the level it sets _ which depletes its reserves of dollars.
Gold shops in Hanoi, which operate a foreign exchange black market, were selling the dollar for 19,650 dong on Wednesday.
Vietnam's situation is unique in Asia. Most countries in the region are grappling with the problem of pressure for their currencies to appreciate rather than depreciate.
The central bank also reduced the band in which the dong can move from 5 percent around the official rate to 3 percent and said its key interest rate would be increased to 8 percent from 7 percent on December 1.
Vietnam's high inflation, sparked by rapid economic growth, has eased this year but it jumped again in November.
Giau said hiking the interest rate would help to cool down credit growth which has seen an increase of 34 percent in the first 11 of months this year compared with the same period last year, according to VnExpress.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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