The Dong follows an accelerating trend of competitive devaluation for most ASEAN currencies.
For the third time this year, Vietnam decided to devalue its currency, the Dong. The new fixed central rate is now 21,890 Dong for one dollar, representing a drop of 1%. The trading band of the Dong has been widened with the possibility for the currency to move 3% above or below its central rate against 2% until today.
According to Vietnam Central Bank, “following the strong devaluation of the Chinese yuan, domestic market sentiment is very much concerned with the negative impact of the United States Federal Reserve’s interest rate increase,” the statement said. Last week, China devaluated its currency by 4.7% against the US Dollar.
Most currencies in Southeast Asia have lost value against the US dollar since the start of the year. The worst performing currencies so far are the Indonesian Rupiah, the Malaysian Ringgit and the Thai Baht. In a year time (August 20,2014 to August 19, 2015), the Rupiah has lost 18.1% of its value, the Ringgit has lost 29.05% in value-its worst ever performance with the dollar reaching over 4 ringgit- while the Thai Baht lost in a year time 11.3% in value. By comparison, the slide in the Dong value is contained to 5.7%.