The Japanese yen and the South Korean won are depreciating against the US dollar and subsequently are also depreciating against the Vietnamese dong, Tuoi Tre has reported. This is on the back of Vietnam trying to keep its currency from devaluing by issuing treasury bills and spending its foreign currency reserves.
Per the aforementioned article, Vietnam’s management of the dong is often a double-edged sword in that a higher dong can lead to fewer tourists from Japan and South Korea and make overseas Vietnamese reluctant to remit money earned overseas back to Vietnam.
Purchasing power for Japanese and Korean consumers is also diminishing amid higher prices reducing demand for goods manufactured in Vietnam.
For some background, the Vietnamese dong is on a managed peg. Each day the State Bank of Vietnam sets a base rate and financial institutions are permitted to trade the local currency up to 5 percent either side. Managing this peg, however, has proved challenging over the last year or two and this has at times led to erratic fluctuations in the currency.
For more information see: The Dong’s Wild Ride: Unpacked 2024