Viet­nam dou­bles cur­rency band af­ter China de­val­u­a­tion

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Viet­nam dou­bled the trad­ing band of its cur­rency to al­low it to weaken fol­low­ing an un­ex­pected de­val­u­a­tion of the Chi­nese yuan.

The State Bank of Viet­nam said in a state­ment that the dong can now be traded in a band 2 per­cent above or be­low the cen­tral bank-set ref­er­ence rate com­pared with 1 per­cent be­fore.

The an­nounce­ment comes af­ter the Peo­ple's Bank of China de­val­ued the tightly-con­trolled yuan by 1.9 per­cent on Tues­day, its big­gest one-day fall in a decade, and let it drop another 1.6 per­cent Wed­nes­day.

China's gov­ern­ment said the de­val­u­a­tion was part of re­forms meant to make its ex­change rate more mar­ket-ori­ented. But the de­ci­sion ac­cen­tu­ated wor­ries over the health of the world's sec­ond-largest econ­omy fol­low­ing a slump in ex­ports, pulling shares, Asian cur­ren­cies and prices of oil and other com­modi­ties sharply lower.

Viet­nam's cen­tral bank said the yuan's de­val­u­a­tion will have a "neg­a­tive im­pact on the Viet­namese econ­omy" be­cause of the sub­stan­tial trade be­tween the two coun­tries that is tilted in fa­vor of China's ex­ports. Two-way trade was $59 bil­lion last year in which Viet­nam recorded a deficit of $29 bil­lion.

The de­val­u­a­tion will "help the dong to be more flex­i­ble and be proac­tive in cop­ing with the neg­a­tive im­pacts in in­ter­na­tional mar­kets and en­sure the com­pet­i­tive­ness of Viet­namese prod­ucts," the cen­tral bank said.

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