Hanoi - In an effort to boost exports, Vietnam's Central Bank devalued the dong currency by 3 per cent on Thursday, driving up black market dollar rates. The state bank of Vietnam set its reference rate at 16,989 dong to the dollar on Thursday, against 16,494 yesterday. Commercial banks were trading at 17,350, while gold shops and black market traders were offering 17,550, up 280 dong compared to Wednesday's rate.
Though devaluing the dong by 3 per cent, the Central Bank still maintained the currency's official trading band at 3 per cent a day.
The State Bank of Vietnam said on its website that the decision was aimed at stabilizing the macro-economy and boosting exports.
"I think it is a reasonable decision, in order to boost exports," said Phan Thanh Son, Vice CEO of Tien Phong Bank in Hanoi.
Son said Vietnam's exporters were suffering as export markets continued to shrink and assessed the move by the Central Bank as a good one.
Son didn't think the move was a signal of the dong's collapse, but proof that the Central Bank had become more flexible in managing its monetary policies.
The country's current foreign reserves stand at 23 billion dollars, compared to 20.3 billion dollars at the end last year.
Vietnam has seen a year of ups and downs in black market exchange rates.
Early this year the dong rose thanks to large inflows of foreign investment, but dropped on the black market at the end of spring thanks to worries about a currency crisis stemming from high inflation. The dong hit 19,500 to the dollar at its highest rate.
As inflation fell the dong stabilized in the third quarter, but has continued to vary in the last quarter of this year.
