Vietnam’s
central bank devalued its currency for the first time since 2011 and cut the
interest-rate cap on dollar deposits to help “improve” the balance of payments
and boost foreign-exchange reserves.
The
State Bank of Vietnam weakened its reference rate by 1 percent
to 21,036 dong per dollar, effective on 27 June, according to a statement
released late 26 June. The currency, which is allowed to trade up to 1 percent on either side of the fixing, fell 0.8 percent to 21,180 in Hanoi. The reference rate had been
kept at 20,828 since 2011 and the spot rate sank to a record 21,036 most days
this month, the lower limit of the trading band.
For
dollar deposits, the central bank cut the cap on corporate deposits to 0.25 percent from 0.5 percent for all
tenors and reduced the limit for household savings to 1.25 percent
from 2 percent. The maximum rate for dong deposits
was also lowered to spur spending and investment. The ceiling for deposits of
less than one month fell to 1.2 percent from 2 percent, while that for periods of up to six months
declined to 7 percent from 7.5 percent.
The
government’s target of 5.5 percent growth this year,
if met, would represent the first time economic expansion slipped below 6 percent for three straight years since 1988, according to
data from the International Monetary Fund. Vietnam’s economy expanded 5 percent last year, the slowest since 1999.