The State Bank of Vietnam (SBV), the country’s central bank, on Wednesday depreciated the dong by one percent against the U.S. dollar in its latest move to cope with the devaluation of the Chinese yuan last week.
The SBV set the official mid-point rate at 21,890 dong to the dollar for interbank transactions, up 117 dong from a day earlier.
The central bank also widened the trading band for interbank dollar/dong transactions from two percent to three percent, after allowing it to move from one percent to two percent on Wednesday last week.
The new band means dollar/dong transactions can move either side of the mid-point, which is set daily by the central bank, within three percent.
The ceiling price for the greenback to be traded in Vietnam is thus VND22,547 a dollar, and the bottom, VND21,233 a dollar.
These are seen as the latest moves by the SBV to protect Vietnam’s economy and exports, after China devalued the yuan by 3.6 percent in total last week.
The depreciation of the Chinese currency has sent shock waves across the globe and triggered many countries to depreciate their currencies against the greenback.
Vietnam’s trade deficit with China widened to $19 billion in the January-July period, compared to $14.5 billion in the same period last year. The full-year trade gap in 2014 was $29 billion.
The recent adjustments of the Vietnamese dong by the central bank are hoped to help the currency trade flexibly enough to ensure stability of the foreign currency market, as well as the competitiveness of Vietnam’s exports.