Vietnam’s dong had its worst week in two months as the central bank set the currency’s fixing lower in an attempt to narrow the gap between the official and unofficial exchange rates. Government bonds fell.
The State Bank of Vietnam lowered the reference rate four times this week, setting it at the weakest level since at least 2005 yesterday. Policy makers have been trying to stem downward pressure on the dong caused by a widening trade deficit and maturing dollar loans. The shortfall jumped to $1 billion last month from a revised $396 million in August, official data show.
“Despite continuous adjustments of the official dong- dollar exchange rate, the gap between market rates and the official upper trading band continues to expand,” Marc Djandji and Doan Thi Thu Hoai, analysts at Viet Capital Securities Joint-Stock Co. in Ho Chi Minh City, wrote in a research note released yesterday.
The dong fell 0.5 percent this week to 20,953 per dollar as of 3:24 p.m. in Hanoi, the steepest decline since the five days ended Aug. 12. It dropped 0.1 percent today and touched 20,963, the weakest level since Bloomberg began collecting data on it in 1993.
The central bank set its reference rate at 20,738 today, unchanged from yesterday, according to its website. The dong is allowed to trade up to 1 percent on either side of the fixing.
In the so-called black market, the currency traded as low as 21,630 per dollar at gold shops in Hanoi today, compared with 21,410 on Oct. 14, according to a telephone information service run by state-owned Vietnam Posts & Telecommunications.
The yield on Vietnam’s five-year bonds gained six basis points, or 0.06 percentage point, this week to 12.41 percent, according to a daily fixing price from banks compiled by Bloomberg.
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