The Economist’s Big Mac Index July update has found that the Vietnamese dong is undervalued, when adjusted for relative-GDP, against the US dollar by 33.3 percent. This represents a devaluation of 2.7 percent from its January update which reported that the dong was undervalued by 30.6 percent.
Of note, since the start of the year, the Vietnamese dong has only devalued against the US dollar by about 4.5 percent since January 1. This has been on the back of efforts by the State Bank to keep the local currency from devaluing further against the US dollar by issuing treasury bills and burning through its US dollar and gold reserves.
On the one hand, this has supported local businesses that rely on imports, like fuel for example. On the other hand, however, it has seen a gap open up between the dong and other currencies in the region. There is now a 6 percent gap between the dong and yen, for example. This could be problematic in that the economies of Japan and Vietnam are intricately interlinked and a divergence of these two currencies could have broad ramifications.