After the People’s Bank of China depreciate the yuan by nearly 2% against the U.S. dollar, banks in Vietnam on August 11 devalued the local currency.
In the morning, Vietcombank bought the greenback at VND21,780 and sold it at VND21,840 but revised up the prices to VND21,795 and VND21,855 respectively in the afternoon.
Other banks also bought the dollar at higher prices. Techcombank bought and sold the dollar at VND21,810 and VND21,870 respectively while SCB and Eximbank quoted their dollar prices at VND21,800/VND21,860 and VND21,800/VND21,850.
Currently, banks are allowed to quote dollar prices in a range of VND21,456 and VND21,890.
A currency changer in HCMC’s District 1 bought and sold the dollar at VND21,920 and VND21,940, compared to VND21,870 and VND21,890 in previous days.
Ending the day, some banks made slight exchange rate adjustments.
Vietcombank lowered the dollar prices by VND10 to VND21,785/VND21,845 a dollar and Techcombank cut the prices to VND21,790/VND21,860. Meanwhile, Eximbank and SCB kept their exchange rates unchanged.
China’s central bank set its official guidance rate down nearly 2% to 6.2298 yuan per dollar, its lowest point in almost three years. The move came after a run of poor economic data in the world’s second largest economy.
At 10:00 a.m. on August 11, the yuan depreciated 2% against the greenback, at 6.3323 per U.S. dollar.
A deputy general director of a major bank said the State Bank of Vietnam had sold around US$1.3 billion to keep the foreign exchange market stable over the past month. The devaluation of yuan and other currencies in the region will pile pressure on Vietnam’s dong currency.
The Singaporean dollar has weakened 5% against the dollar, Korea’s won 6.42%, Thai’s baht 6.85%, and Malaysia’s ringgit 11.45%. However, the dong has been devalued by a combined 2% against the dollar this year.
Vietnam’s balance of payments reportedly ran a deficit of US$3.9 billion in January-July and this would impact the exchange rate, the banker said.
Other bankers suggested the central bank consider devaluating the dong further or raising the trading band of the inter-bank rate to 1.5-2% instead of 1% like now.
Commenting on China’s yuan devaluation, Benny Cheung, head of markets at HSBC Vietnam Bank, told the Daily via email that the market is generally on risk off mode after the yuan depreciation and funds withdrawn from regional currencies such as the Australian dollar, Korean won and Singaporean dollar.
“We see the dong opened softer this morning, too and was up by about 20 basis points from on August 11 close (spot at around VND21,835), but impact on the domestic currency is much less compared to other regional currencies,” Cheung said on August 11.
While certain Vietnam products may face increasing price competition on the back of regional currencies’ depreciation, there are still a lot of medium-term structural cost benefits for Vietnam goods such as sufficient labor force, low labor cost, government policies and free trade pacts. This is supported by promising export growth figures in Vietnam since early this year compared to negative export growth in China.
Companies should focus on the longer-term outlook when they plan business and investment, considering factors such as infrastructure, labor, policies and stability, Cheung said.