Tuesday, January 08, 2008

Down Goes the Dollar

For the first time the official exchange rate between the Vietnam Dong (VND) and US Dollar is below 16,000. The official exchange rate was pegged at a lowered 16,107 yesterday, and combined with the recent move to widen the allowable trading band from 0.5% to 0.75%, this meant that local banks are now buying and selling VND at below the psychological barrier of 16k.

With the weakening dollar over the past year, and the concomitant appreciation of virtually all world currencies, including the basket of ASEAN specie, most local market participants have expected the VND appreciation, and apparently in 2008 the Government is starting the process. With all the FDI, some have forecasted VND appreciating to as much as 14k.

It'll be a slight pain for those tourists who'll have to do more complicated math in the coming months.  It'll be more of a pain for those who make money in USD but have the majority of their expenses in VND.    

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