Vietnam’s currency, the dong, is crashing after the government was forced to devalue it by 3.4% against the U.S. dollar for the second time in under three months.
The new fixed rate for the currency is 18,544 dong per dollar, versus 17,941 previously. The central bank also imposed a 1% ceiling on interest rates for dollar deposits at banks in a bid to disincentive the hoarding of dollars.
Yet the black market thinks that the government will have to slash the dong’s exchange rate even further:
The devaluation will help make Vietnam’s key exports, which include shoes, coffee and rice, cheaper than those of many other Asian countries, potentially improving its relative position in global trade.
Many Vietnamese residents have responded by hoarding dollars out of fear the dong will become even less valuable in the future.
On the unofficial market, such as in gold shops that double as foreign-exchange dealers in Vietnam, one dollar was buying 19,180 dong earlier on Wednesday.