Vietnam Dong devaluates further in 2007

Vietnam's currency will decline 1 to 2 percent next year as inflation reduces the value of the currency, a forex expert from Morgan Stanley said.
The central bank may allow the depreciation to keep exports competitive, defying a September call by the Group of Seven industrialized nations for emerging economies with current-account surpluses to have more flexible currencies.
The dong closed at 16,098 per dollar Tuesday, according to data compiled by Bloomberg. The currency has fallen every year in the past 10 and lost 1.1 percent since the start of January.
The State Bank of Vietnam restricts conversion of the dong and only allows the currency to trade 0.25 percent either side of its daily official exchange rate, according to HSBC Holdings Plc research.
“The State Bank has moderately pushed the dong's value so as to keep it weak enough to encourage exports, said Truong Van Phuoc, director of the foreign exchange department at the State Bank of Vietnam in Hanoi. “But it also has to be within a range that ensures inflation will not get out of control." The nation's 6.7 percent annual inflation in October, the slowest in 2 1/2 years.
The current account, a broad gauge of trade that includes income from commerce, investment and services, went into surplus in 2005 after three years of deficits as exports surged.
Vietnam's trade deficit was $4 billion in the first 10 months of the year, the government said Nov. 2, down 2 percent from the same time a year earlier. Exports jumped 24 percent to $32.9 billion, while imports rose 21 percent to $36.9 billion.
“Although the supply of foreign exchange is increasing, since we import more than we export, the demand for foreign exchange for imports is still strong,'' Truong said.