"We maintain our medium-term positive view on Vietnam, but policymakers need to draw important lessons from the current episode to modernise the monetary policy regime and make way for a more flexible exchange rate to act as a shock absorber. "This will likely take the form of another de-facto devaluation of the dong. "We believe that further policy tightening will be required to stabilise the situation," said Bank of America Securities' ASEAN economist Mohamed Faiz Nagutha in a note to clients on Tuesday. Vietnam's foreign reserves have fallen significantly since the start of the year, from the peak of $112.2 billion in January to $94.5 billion in August, according to a Fitch Solutions report citing IMF data.Īround $2 billion of foreign investment inflows in the form of existing loan contracts are expected next month, which could reduce the pressure on the currency. The source said the SBV was trying to conserve its dollars as the country's FX reserves had sunk to the International Monetary Fund's recommended level, which is at least three months of imports. That's why the dong is under so much pressure," the source said. "Vietnam's response to the global situation has not been so prompt. It has now raised its policy rates twice in four weeks. Unlike its neighbours and global emerging market peers, Vietnam's central bank only began to raise interest rates in recent weeks to combat inflation. Up until September, the dong was the most stable currency in the region, with the economy recording another quarter of strong growth and solid exports providing policymakers with plenty of hard currency to support it.īut October alone saw a 4% erosion in the dong's value against the dollar, underperforming its peers in Asia. SBV had no comment on the possible widening of the trading band, saying it would be in touch with relevant agencies. "The key measure for the SBV to stabilise the dong is still selling dollars and buying dong, but the SBV is not in a good position to do that now," the source said. The timing of such moves was still under consideration, he added, but would likely be after next week's Federal Reserve meeting where it is expect to deliver another hefty rate hike. Other measures to cushion the dong, without exhausting FX reserves, were also being discussed, he said, without providing further details. Widening the band, which would allow the market to drive the currency lower without triggering so much FX reserves selling, was one possibility, the source said. A historic high of 36,565.5 VND was reached in 2014. The source, who refused to be identified, said the country is willing to tolerate a further 1-1.5% dong devaluation against the dollar by year end. The Vietnamese dongs value has been between 32,918.9and 26,816 VND against GBP over the past five years. But on the black market, it was trading at a record low of 25,370 per dollar. 17 to 5% from 3% - which some traders likened to a de facto devaluation - the currency fell to the weak end in a sign of the heavy demand for dollars.īy 0324 GMT on Wednesday, the dong was down 0.04% to 24,855 per dollar. When the SBV last widened the band around its daily dong reference rate on Oct. Some market analysts estimate about $20 billion has been sold so far this year. The State Bank of Vietnam (SBV) has intervened to defend the currency, although it rarelyĭiscloses FX reserves data or the amount of dollars spent. Federal Reserve repeatedly raises rates to tame inflation. The dong, is a managed peg to the dollar and has fallen 8% this year, pressured by capital outflows as the U.S. dollar again, in order to conserve its shrinking currency reserves, a source with direct knowledge of the matter said on Wednesday. Any amount in excess of this will need to be declared to Customs at the airport.HANOI, Oct 26 (Reuters) - Vietnam is preparing to loosen its tight leash on the dong currency, including possibly widening its trading band with the U.S. If you plan to take money out of Vietnam, you can take out amounts of less than 15 million in Vietnamese dong or USD5000 (or equivalent in other foreign currencies) without declaring this. You can have funds transferred to Vietnam via international money transfer companies like Western Union or Moneygram.
It may be difficult to cash travellers’ cheques.ĪTMs are widely available in major cities and tourist areas. Changing money elsewhere is illegal and while higher rate may be on offer you may risk losing your money.Ĭredit cards are widely accepted but, in rural areas particularly, you should carry cash as a back-up. Only change money at official money exchange counters with a clear sign showing this status. The local currency is Vietnam Dong (VND).
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