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Dong falls to lowest since 1993 on interest-rate cut
The dong closed Wednesday at the lowest level since at least 1993 on speculation reduction in interest rates will diminish the appeal of the currency.
The State Bank of Vietnam on Monday reduced the benchmark interest rate by 1 percentage point to 13 percent and doubled the interest rate it pays on compulsory reserves to 10 percent, from 5 percent, to increase money supply in the banking system.
The measures will weaken the currency, said Yi Choonshik, head of Korea Investment Trust Management Co.’s equity team in Ho Chi Minh City. The dong declined for the fourth day.
With the reduction of interest rates, a “significant amount of liquidity will flow into the market,” Yi said. “The dong will become less attractive and we’ve already seen a depreciation.”
The currency fell 0.01 percent to VND16,850 per dollar as of 5 p.m. Wednesday in Hanoi, the lowest close since Bloomberg started compiling data on the currency in 1993.
The State Bank of Vietnam weakened the currency’s daily reference rate to VND16,521 a dollar from VND16,519 Tuesday, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.
Thanhnien
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