Vietnam devalues dong for second time this year after trade deficit

A bank teller holding up a bundle of Vietnamese dong in Ho Chi Minh City. Vietnam devalued the dong for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit. -- PHOTO: BLOOMBERG 
A bank teller holding up a bundle of Vietnamese dong in Ho Chi Minh City. Vietnam devalued the dong for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit. -- PHOTO: BLOOMBERG 

HANOI (Reuters) - Vietnam devalued the dong currency for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit.

The move had been widely expected after Vietnam recorded a US$3 billion trade deficit in the first four months of the year, compared with a surplus of US$2 billion in the same period last year.

The central bank said it had lowered the mid-point rate for the currency on the interbank market by 1 per cent to 21,673 dong per US dollar.

Dollar/dong transactions can move in a band of plus or minus 1 per cent around the mid-point, which the central bank sets daily. The previous depreciation was on Jan. 7, when the central bank also weakened the dong by 1 per cent to help stabilise the foreign exchange market.

The State Bank of Vietnam said in a statement that recent pressure on the dollar/dong rate was "psychological" and "in market expectations", saying its latest move was to help meet socio-economic targets and cope with negative impacts from global markets.

"The (market) expectation is more depreciation as the dong is down just 2 per cent while other currencies in the region have fallen 4-5 per cent now," a money market dealer at a Vietnamese bank in Ho Chi Minh City said.

Last December, central bank Governor Nguyen Van Binh said it would keep the dong depreciation to less than 2 per cent for the whole of 2015.

After Thursday's adjustment, the dong fell to 21,650/21,730 per dollar on the interbank market, from 21,620/21,670 the previous day.

Vietnam's January-April exports rose 8.2 per cent to an estimated US$50.1 billion, while imports surged 19.9 per cent.

The government has projected annual export growth of 10 per cent for the whole of 2015, slowing from a rise of 13.7 per cent last year.