Vietnamese currency falls to record low against dollar
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The dong depreciated to a new low against the U.S. dollar Wednesday morning, with state-owned Vietcombank selling the greenback at VND24,620 at 11.30 a.m.
The Vietnamese currency fell 0.12% from Tuesday and 7.24% since the beginning of the year. Eximbank sold the dollar at VND24,620, 0.24% higher than Tuesday, and Techcombank at VND24,680, 0.33% higher.
The U.S. Dollar Index, which measures the currency’s strength against six major currencies, is at the highest level since 2002 of around 112.
Analysts expect the dong to come under more pressure from a surging dollar in the remaining months of this year since the State Bank of Vietnam does not have much reserves left to defend the dong after selling around 20% on it so far this year.
As up to 70% of all trade contracts in Vietnam are paid in dollars, its continuing strength is bad news for businesses.
Questions & Answers
Q.What is the primary reason for the dong's continued pressure against the dollar?
What is the primary reason for the dong's continued pressure against the dollar?
Analysts expect the dong to remain under pressure due to the surging dollar. This is exacerbated by the State Bank of Vietnam having limited reserves left after selling approximately 20% of them this year to defend the currency.
Q.How does the strengthening dollar affect Vietnamese businesses?
How does the strengthening dollar affect Vietnamese businesses?
A continuing strong dollar is negative for Vietnamese businesses. This is because up to 70% of all trade contracts in Vietnam are paid using the U.S. Dollar, making transactions more expensive for local firms.
Q.What is the current value of the U.S. Dollar Index?
What is the current value of the U.S. Dollar Index?
The U.S. Dollar Index, which gauges the dollar's strength against six major currencies, is currently around 112. This level marks its highest point since the year 2002.