Vietnam Central Bank Widens Currency Trading Band Amid Slump

The trading range for the dong was enlarged by Vietnam's central bank, indicating that the government is prepared to accept further currency depreciation.

With effect from Monday, the State Bank of Vietnam increased the daily trading range for the dong from 3% to 5% on either side of the fixing rate, according to a statement posted on its website the same day. 

 To establish a new record low, the dong fell as much as 0.8% to 24,310 per dollar.

According to Trinh Nguyen, a senior economist at Natixis SA in Hong Kong, "this is a signal to the market that it is tolerating greater FX weakness and volatility."

 It implies that the central bank is less inclined to defend the dong by using reserves.

The persistent rise of the US dollar is pressuring central banks to increase intervention as emerging countries run the risk of depleting their dollar reserves too fast.


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