The Hong Kong Shanghai Banking Corporation (HSBC) believes Vietnam may devalue the dong by 1 percent further to protect Vietnamese competitiveness.
The report released on August 20 by HSBC Vietnam predicted the dong/dollar exchange rate would rise from VND21,800 per dollar to VND22,830 by the end of 2015 and to VND23,300 by the end of 2016.
Analysts said that HSBC, like other financial institutions, has reasons for such a prediction.
“No one can say for sure what the exchange rate will be. Vietnam cannot print the greenback, while SBV is not a powerful agency which can determine the greenback value,” an analyst said.
“The dong/dollar exchange rate will depend on many factors, including the US Federal Reserve’s decision on prime interest rates and the performance of global economies, including China,” he said.
The central bank had to devalue the dong by 3 percent this year, though it promised not to devalue the currency by more than 2 percent.
Dr. Le Dang Doanh, a renowned economist, noted that HSBC based the prediction on the information it collected and analysed.
While declining to comment on HSBC’s prediction, Doanh said there were two important factors to affect the dong/dollar exchange rate in upcoming days – the Chinese yuan price fluctuation and the US FED’s decision on the prime interest rate.
According to Doanh, indexes all show a poor performance of the Chinese economy, which may have been the reason for the Chinese government’s devaluation of its currency.
“The demand in China and the world has decreased sharply, while Chinese supply is very high. The demand for cement and steel, for example, just accounts for 50-60 percent of the supply. Meanwhile, China’s debts are relatively high,” Doanh explained.
“This could be the information HSBC referred to when predicting the moves to be taken by the Vietnamese government,” he said.
“The best attitude for the central bank to have now is to convey the message that it will try to stabilize the exchange rate if there are no abnormal changes,” he said.
Dr Vo Tri Thanh, deputy head of the Central Institute of Economic Management (CIEM), said the scenario of the Chinese government devaluing the yuan sharply and the FED adjusting the interest rate “needs to be considered”, because this would affect Vietnam’s forex policy.
original source: http://english.vietnamnet.vn/fms/business/141385/economists-deny-prediction-about-additional-2--vnd-devaluation.html