Central bank weakens dong further after new mechanism takes effect

Wednesday, 2016-01-06 11:33:46
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NDO - The State Bank of Vietnam (SBV) on January 5 weakened the Vietnamese dong by a further VND11 per US dollar, the second time since it began a new method to manage exchange rates.

A day earlier, the money authority devalued the local currency by VND6 against the greenback.

With the trading band still kept at 3%, banks are allowed to trade the US dollar within the VND21,250 - 22,564 range.

The SBV said on December 31 that from 2016 it would adopt a managed floating exchange rate policy, which means it would still announce the VND/USD exchange rate but with a proper adjustment every day.

The new method allows the exchange rate to be more flexible in response to forex demand and supply and global volatility while still ensuring the regulatory role of the central bank.

Previously, the exchange rate was only adjusted occasionally.

Under the new system, the SBV’s daily reference rate is determined based on a weighted average of exchange rates on the interbank market and values of a number of foreign currencies of countries with large trade relations with Vietnam.