The State Bank of Vietnam (SBV) lowered the dong (VND) by 1 percent against the dollar in anticipation of a United States interest hike. The currency has depreciated nearly 5 percent so far this year.
It subsequently widened the dollar-dong trading band to 3 percent from 2 percent, the second increase in six days, stressing new challenges in the export sector in the wake of China’s surprise move last week.
“Following the strong devaluation of the Chinese yuan, domestic market sentiment is very much concerned with the negative impact of a U.S. Federal Reserve interest rate increase,” the central bank said in a statement.
The country’s economy is closely tied to its neighbor: three-quarters of its $60 billion bilateral trade comprises Chinese imports. Apparel exports to the U.S., meanwhile, grew more than 18 percent in June to $923 million, according to data recently released by the International Trade Administration’s Office of Textiles and Apparel, making it the market’s No. 2 source of garments.
Experts have largely welcomed the news, pointing out that figures from the General Department of Vietnam Customs showed that the country’s first-quarter imports exceeded exports for the first time in three years.
“Today’s move is a very good policy action,” Le Anh Tuan, chief economist at Dragon Capital Group Ltd. in Ho Chi Minh City, told Bloomberg. “It will make the currency more competitive and help boost exports.”
Vietnam’s benchmark VN Index fell to 566.69 points by Thursday afternoon from closing Wednesday at 577.8.