Vietnamese Dong Weakens 1.4% After Central Bank Widens Band

By Van Nguyen

June 27 (Bloomberg) -- The Vietnamese dong fell 1.4 percent after the central bank doubled the daily trading limit to 2 percent, responding to pressures to weaken the currency.

The dong declined to the lowest since at least 1993, taking losses this quarter to 4.4 percent, the most since the period ended September 1998. The widening in the currency's band reduced the risk among onshore investors about uncontrolled depreciation, said Richard Yetsenga at HSBC Holdings Plc.

The currency dropped to 16,843 against the dollar as of 11:35 a.m. local time, according to prices compiled by Bloomberg, from 16,615 yesterday. The State Bank of Vietnam set a weaker reference rate of 16,516, compared with 16,451 yesterday, according to its Web site.

``Unfortunately, turnover in the onshore market today is very low,'' said Yetsenga, a foreign-exchange strategist at HSBC in Hong Kong.

Vietnam's inflation rate accelerated to 26.8 percent in June from the same month a year earlier, the highest in 16 years, the General Statistics Office in Hanoi reported yesterday. The Southeast Asian nation's inflation has quickened for 17 months to the fastest in Asia.

The yield on Vietnam's benchmark five-year government bond was unchanged at 20 percent yesterday, according to a daily fixing price from 10 banks compiled by Bloomberg. Yields have more than doubled this quarter from 8.71 percent on March 31.

Vietnam's State Treasury will auction 300 billion dong ($17.8 million) of two-year bonds this afternoon, the Hanoi Securities Trading Center said in a statement.

To contact the reporter on this story: Van Nguyen in Hanoi at Vnguyen23@bloomberg.net