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Nothing Erodes Trust Like Dong’s Devaluation, Tran Du Lich Said

Yuan’s fluctuation is the evitable result of US – China trade war and the tarriff retaliations from both sides. Vietnam has close economic and trade relation with both US and China thus Vietnam has many headaches in dealing with the exchange rate matter.

Nothing Erodes Trust Like Dong’s Devaluation, Tran Du Lich Said
Diep Nguyen16:48 20/05/2019
Over the past weekend, the yuan/USD exchange rate got the world attention. It reminds people of the yuan exchange rate fluctuation one year ago, at that time, the record devaluation of yuan stumbled the world financial markets, the VND/USD exchange rate also moved sharply.
After many months of stablizing from the final months of 2018 to the end of first quarter 2019 when 1 USD is equal to approximately 6.72 yuan, since the end of April, the yuan started the new devaluation cycle. By the end of the past week, it took 6.92 yuan to exchange for 1 USD.
This yuan fluctuation is the evitable result of US – China trade war and the tarriff retaliations from both sides. Vietnam has close economic and trade relation with both US and China thus Vietnam has many headaches in dealing with the exchange rate matter.
In the recent talk with Bizlive, former President of Ho Chi Minh City Institute of Economics, member of Economic Advisory Group for the Prime Minister, economist Tran Du Lich said: “The world witnesses many huge changes, external factors are becoming more and more complicated. People have been worried about the US – China trade war and China’s potential devaluation of yuan. The Federal Reserve has stopped increasing dollar rates and this is supportive for growth”.
Lich said that people need not to worry about the yuan’s devaluation because it may not be too high.
Lich thought that is is not good for Vietnam to devaluate the Vietnam dong just because Chinese devaluates the yuan. Member of Economic Advisory for the Prime Minister believed that Vietnam should use other methods to control the trade, but Vietnam must not use the exchange rate mechanism.
Vietnam has successfully maintained the depositors’s trust in the system and this is critically imporant. This trust must be kept as strong as possible as nothing erodes the confidence like the local currency devaluation. The Vietnam dong devaluation will create two consequences: It will increase of Vietnam’s national debt; then Vietnam dong’s evaluation can lead to capital flight and this goes against the target of the government.