current value as of writing this is 1.00 USD = 20,929.59 VND on March 20,2013.

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Ha Long Bay

below is the Historical Forex ticket for the last 8 years or so on the Exchange rate to the USD.

Historical US Dollar / Dong

Date $1 USD/VND

2013-03-20 20947.9409

2010-03-20 18684.972

2008-03-20 15000.5461

2004-08-27 14000.98

vietnam-currency-Large pic

Those official exchange numbers don’t really reflect the true exchange rate for Vietnam’s currency. There is a thriving black market for currency exchange that is conducted primarily at gold retailers. The black market exchange rate in Ho Chi Minh City has been as high as 20,929.59 per U.S. dollar recently.

Since June 2008 the dong reference rate has been devalued by more than 20 percent and foreign exchange reserves have fallen sharply, making it increasingly difficult for the government to break a cycle of devaluation expectations. Most other currencies in the region gained ground against the weak dollar

Nonetheless, this was the first time Vietnam’s central bank has devalued its currency. It is the third devaluation in the last 10 months in 2010 3.4% in February and by 5.4% in November, in just 2010 alone….and again in Feb 2011..

(except taken from Reuters News article on Fri Feb 11, 2011 10:37am)

UPDATE 3-Vietnam devalues dong again in step to mend economy

HANOI, Feb 11 (Reuters) – Vietnam devalued its beleaguered currency on Friday for the third time in a year, as authorities started to try to address festering economic problems that critics say have been brushed aside in the pursuit of growth.The State Bank of Vietnam dropped the dong’s reference rate VND=SBVN to 20,693 dong per dollar from 18,932, an 8.5 percent devaluation, and narrowed the currency’s trading band to 1 percent from 3 percent on either side of that mid-point rate

 Friday’s devaluation was the sixth — and by far the biggest — in nearly three years. One year ago, the dong was devalued by 3.2 percent, and in August there was a 2.0 percent devaluation. (as written on Feb 11, 2011)

 

The International Monetary Fund welcomed the changes, but said authorities needed a “broader set of policies” to restore macroeconomic stability

 

“For the short term (the devaluation) is bad, but after a week I expect more foreigners will come into the stock market to trade, so it’ll be good for the market,” said Quach Manh Hao, Deputy Director of Thang Long Securities…that was once again written Feb 11, 2011..

Below we discuss what has developed since these Devulations and what does Vietnam’s currency hold for the future Currency Investor as viewed by this writer JP.

Lets discuss 1st why the Devalue process took place..

Devaluation is a reduction in the value of a currency with respect to other monetary units. In common modern usage, it specifically implies an official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, (currency) depreciation is most often used for the unofficial decrease in the exchange rate in a floating exchange rate system.

There could be many motives of the devaluation. It stimulates exports of commodities, it restricts import demand for goods and services, and it helps in creating a favorable balance of payments. Almost all the countries of the world have devalued their currencies at one time or the other with a view to achieving certain economic objectives. During the great depression of 1930 devaluation was carried by most countries of the world for the objecting of correcting over-valuation of currencies. For some weak currencies, devaluation is a process without end that leads to completely worthless currencies,

Why did Vietnam do this? To reduce and hopefully reverse the big trade deficit it has been running.

The major imports into Vietnam are oil .(Note here: Iraq is now the big Import of Oil due to the Sanctions on Iran), pharmaceutical drugs, machinery, military supplies, vehicles, and food. Vietnam’s major exports are coal, crude, petroleum, peanuts, rice, rubber, tea, and handcrafted bamboo and rattan products.

Vietnam’s problem is that its imports are growing faster than its exports.

exports ship

By devaluing its currency, Vietnam is making its exports cheaper for foreign buyers.

The main destinations of Vietnam’s exports were the United States (19%), Japan (13%), China (10%), Australia (7%), Singapore (5%), and Germany (4%). (Note: % figures here are taken from 2011)

Vietnam is trying to avoid the slippery slope of becoming hopelessly mired in the cycle of annual trade deficits. Vietnam does not want to follow America’s disastrous trade example… and could be following China’s economic tables for sure.

The U.S. is and has been running massive trade deficits for years. Just in the month of June, the U.S. ran a $49.9 BILLION trade deficit. Yup, almost $50 BILLION dollars!

That’s because the U.S. has bought a total of $177 billion worth of goods from other countries in the first six months of 2010.

That number is almost double the $20-billion monthly average deficit that the U.S. has been running for years.

By the way, most of that deficit — $26.2 billion — was with China. When you think about all the oil we import, it is an amazing testament to the Chinese economy that we spend more on clothes, electronics, shoes and toys from China.

Those gigantic trade deficits (as well as gigantic budget deficits) are why the U.S. dollar has been on a steady downward spiral for years. Since 2002, the U.S. dollar index has lost 25% of its value against a diversified basket of international currencies.

Vietnam has just recently started to implement some free market reforms into its economy and is on track — with moves like this currency devaluation — for sustainable and meaningful economic growth.

Vietnam joined the World Trade Organization in 2007 and is quickly becoming an economic force in the region. It has a young, enthusiastic workforce, and is attracting tons of foreign capital.

This may surprise you, but many Chinese companies are opening new factories in Vietnam. The reason is that Vietnam wages are even lower than Chinese wages, so new manufacturing plants and factories are being opened at a rapid pace.

Perhaps even more important is a new and LARGE government stimulus package to increase consumer demand and boost construction/infrastructure projects. When I look at Vietnam, I see many of the same advantages that turned China into an economic powerhouse.

It may be a bumpy ride, but I believe Vietnam will be one of the most lucrative markets in Asia for stock market investors.

Unlike China, Japan, and Korea, there isn’t a single Vietnam stock listed on any American stock exchanges. Plus, the Vietnamese government has made it hard for foreigners to invest directly into the Vietnam stock market.

The most practical way to add Vietnam into your portfolio is with Market Vectors Vietnam (VNM) exchange traded fund, which includes a variety of financial, energy, industrial and consumer stocks.

I would not rush out and buy VNM tomorrow morning, but if you missed out on the early (and HUGE) gains of Chinese stocks, don’t make the mistake of ignoring the big opportunities in Vietnam Currency.

The Vietnam’s currency should be in your basket of Investment Currency to hold now imo.. especially as cheap as it is right now..

Sorry, but I don’t hold a crystal ball as to when one should see a Revalue in the Dong , other than the Vietnam Dong is looking good for the future as we will see it and many others Revalue…It has been suggested by highly recognized Economist that the  Vietnam Dong may Revalue significantly as early as 2018  if they can maintain the economic pace they are on and keep Corruption at bay..Good Luck..jp

Did you know?

  • Vietnam is the largest producer of black pepper in the world, responsible for one-third of the global supply. Vietnam is the world’s second largest exporter of rice, second only to Thailand.
  • Vietnam has one of the lowest unemployment rates of all emerging markets.
  • Bill Clinton was the first U.S. President to visit Vietnam and was given a hero’s welcome when he arrived in 2000.
  • Vietnam’s official name is the Socialist Republic of Vietnam.
  • Vietnam’s 86 million citizens have a literacy rate of 94%.
  • The four largest motorcycle markets in the world are all in Asia: China, India, Indonesia, and Vietnam.
Jp Outhouse/Bluewaters2u Resources for above article derived from Thomas Reuters, Wall Street Journal, IMF and the Uncommon Wisdom Daily (T. Sagami) ..
Currency’s Continued: Vietnam’s currency… The Dong.
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