Vietnam index falls 1.7 pct after dong devaluation

Yesterday, the State Bank of Vietnam lowered the official mid-point rate by 0.99 percent to 21,890 dong per dollar and widened the trading band to 3 percent from 2 percent.

The State Bank of Vietnam (SBV) has devalued the dong for a third time in 2015, as the Asian country looks to maintain its export competitiveness after China devalued the yuan for its advantage. Vietcombank, the country’s biggest lender by market value, lost 1.88 percent while property firm Vingroup declined 2.4 percent.

This is because Vietnam has every reason to peg its dong to the yuan – not to the dollar. Here is a snapshot of the VN Index at midday (0431 GMT). He said a possible Fed rate increase later this year would weaken the appeal of the dong even more.

Vietnam on Wednesday devalued its currency by 1%.

Vietnam’s economy is closely tied to its communist neighbour, with three quarters of bilateral trade worth $60 billion being imports from China. Malaysia’s ringgit leads regional losses so far in August with a 6.4 percent slide.

“The Vietnamese Dong has been one of the more resilient currencies amidst the EM Asia currency downdraft of recent months”.

The dual impact of China’s renminbi devaluation – and worries about the country’s slowdown – along with anticipation of a US rate rise is weighing on currencies in emerging markets, already feeling the pain of falling commodity prices. “Some re-alignment of the currency therefore seems warranted from a macro-balance perspective”.

With the fresh devaluation and the new trading band, one U.S. dollar can be traded for between 21,233 dong and 22,547 dong, the central bank said in a statement on its website. That followed similar-sized cuts to the fixing in both 2014 and 2013. China has been Vietnam’s biggest trade partner since at least 2007.

“Today’s move is a very good policy action”, Le Anh Tuan, chief economist at Dragon Capital Group Ltd. said by phone from Ho Chi Minh City. “It will make the currency more competitive and help boost exports”.