Vietnam Dong Falls 1.2%, Most in 3 Months on New Band

March 24 (Bloomberg) -- The Vietnamese dong fell the most in three months after the central bank widened the currency’s trading band for the first time since November, seeking a weaker currency to boost exports.

The dong slipped 1.2 percent, the biggest drop since Dec. 25, to 17,700 per dollar as of 12:36 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. The State Bank of Vietnam left its reference rate unchanged at 16,980.

The central bank said yesterday the currency can trade 5 percent on either side of that fixed rate from today, compared with 3 percent previously. The government is trying to bolster exports after the economy expanded 6.2 percent last year, the slowest pace since 1999.

“We are looking for the authorities to weaken the currency by at least 6 percent this year,” said Nicholas Bibby, an economist at Barclays Plc in Singapore. “Concern about inflation has dissipated and will trend lower. Economic growth has slowed and so have exports. A weaker currency may help to temper this.”

Vietnam’s inflation is at a 16-month low, giving authorities more room to use currency policy to support the economy rather than limit import costs. The World Bank last week forecast Vietnam’s gross domestic product will increase 5.5 percent this year and the International Monetary Fund predicted 4.8 percent growth.

Consumer prices rose 11.3 percent from a year earlier this month after gaining 14.8 percent in February, according to figures released today by the General Statistics Office in Hanoi. On a monthly basis, prices fell 0.2 percent from February.

Market Rate

The widening of the dong’s trading band will allow “exchange rates that are closer to supply and demand,” the State Bank of Vietnam’s Governor Nguyen Van Giau said in a statement posted on the central bank’s Web site yesterday. The regulator on Dec. 25 devalued the dong 3 percent by fixing its reference rate weaker.

The currency’s exchange rate at money changers in Hanoi surged to as high as 18,000 per dollar from 17,680 yesterday, according to a telephone directory information service, known as 1080, run by state-owned Vietnam Posts and Telecommunications.

The central bank will “continue moving to a more flexible exchange rate regime,” Tetsuji Sano, a Singapore-based economist at Nomura Holdings Inc., wrote today in a research note. “The next move may be to lower the central reference rate in line with market transactions by the end of the second quarter.”

(Nguồn: Bloomberg)