Vietnam weakens dong reference rate to boost nation’s exports

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The State Bank of Vietnam devalued the dong by weakening its reference rate for the second time since June, seeking to spur exports and sustain growth.
The central bank in Hanoi weakened the reference rate 1 percent to 21,458 dong per dollar, effective today, Jan. 7, it said on its website late yesterday. The currency is allowed to trade as much as 1 percent either side of the reference rate.
Shipments from manufacturers such as Samsung Electronics Co. have buoyed Vietnam’s exports, which the government estimates grew 13.6 percent last year. That has helped offset faltering local demand and a slowdown in lending, as authorities take steps to clean up bad debt and overhaul the financial system. The government projects growth of 6.2 percent in 2015, quickening from an estimated 5.98 percent last year.
The decision “is in line with movements in the local and international currency markets,” the central bank said, an acknowledgement also of the global appreciation of the dollar on expectations the U.S. Federal Reserve will begin to raise interest rates this year. The Bloomberg Dollar Spot Index rose 11 percent last year, the most since at least 2005.
The State Bank said it “will take comprehensive measures to stabilize the dong’s exchange rate and the currency market on the new price level.”
At the new reference rate, the currency is allowed to fluctuate from 21,243 dong against the dollar to 21,673 dong, the State Bank said.
‘Lot of pressure’
Central bank Governor Nguyen Van Binh said last month he planned to adjust the dong’s reference rate by as much as 2 percent during 2015.
The dong closed little changed at 21,398 per dollar in Hanoi yesterday, according to data from banks compiled by Bloomberg. The change in the reference rate was announced after trading ended.
“There has been a lot of pressure on the dong, and the State Bank may want to relieve the pressure on the currency,” Alan Pham, Ho Chi Minh City-based chief economist at VinaCapital Group, the nation’s biggest fund manager, said by telephone after the move. “We are heading to the Lunar New Year when demand for dollars is increasing as companies need to pay their import contracts. This devaluation is necessary and helpful for exports.”
Vietnam’s central bank cut policy interest rates twice in 2014 in a bid to spur lending and help businesses. Inflation (VNCPIYOY) eased to 1.84 percent in December from a year earlier, the slowest pace since at least 2006. The government has ordered fuel retailers to cut tariffs and asked industries to stabilize prices before and during the Lunar New Year holiday in February.
GDP
The yield on benchmark five-year government bonds was little changed yesterday at 6.23 percent yesterday, according to a daily fixing from banks compiled by Bloomberg before the reference rate change was announced.
Gross domestic product rose 6.96 percent in the fourth quarter from a year earlier, accelerating from a revised 6.07 percent gain in the three months through September, according to data released by the General Statistics Office in Hanoi Dec. 27. For the full year, the economy grew 5.98 percent, beating the government’s 5.8 percent target and compared with a median estimate of 5.7 percent in a Bloomberg survey.
Source : Thanh Nien Daily | January 7, 2015
Thomas D’Innocenzi
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About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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