VINACHEM

The dong will fall around 4-5 percent against the US dollar this year as the Federal Reserve is expected to raise interest rates further and push up the greenback, the Vietnam News Agency reported on Monday, citing new forecasts.

The drop will be similar to the depreciation of the Vietnamese currency seen last year, Vietcombank Securities Company was quoted as saying in its new report.

Considering that the Fed may increase rates gradually, Vietnam has enough time to get ready for a weakening dong, the company said.
Vietnam's central bank, in fact, has made a necessary move which is setting a mid-point rate for the dollar/dong every day, according to the report.

The new policy, which has showed the central bank's flexibility, came after its plan to keep the dong from falling by more than 2 percent amid strong US dollar purchases and unexpected plunges in China's yuan last year, it said.

The company said it does not see any clear internal factors that will put pressure on the dong. Dollar hoarding has been considerably curbed by recent measures taken by the central bank, including zero interest rates on dollar deposits.

Trinh Quang Anh, director of Maritime Bank's economic research center, gave a similar forecast, saying the dong will drop by around 4 percent this year.

Le Xuan Nghia, a banking and finance expert, also said with the central bank's recent policies, the exchange rate will rise about 5 percent, which is not a big change.

The central bank set the mid-point rate at VND21,873 on Monday, down 0.1 percent since it first set the rate on January 4. Banks are allowed to trade the dollar within 3 percent below or above the reference rate.