Vietnam’s transition to a market-based economy, strong foreign capital investment, and net imports have led to inflation and trade and budget deficits. This in turn is putting pressure on its currency, the Dong. Vietnamese residents have responded by hoarding dollars and gold.
The State Bank of Vietnam has just done what Washington would like to see Beijing do: adjust its currency value, which is pegged to the U.S. dollar. Now, one U.S. dollar will buy me 18,544 dong, compared with 17,941 dong earlier in the week. In other words, exports are cheaper and as a visitor I am richer.
Don’t’ expect this to happen to neighboring China, Thailand or Indonesia. The enjoy strong foreign exchange reserve and trade surpluses. Their currencies are under pressured to rise, not weaken. And Beijing will do what it must to keep its economic engine growing.
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