DBS Bank downgrades dong's outlook

DBS bank downgraded its forecast for the dong and expects the currency to decline by another 3.75 per cent against the U.S. dollar.

This comes after the 8.5 per cent devaluation on February 11.

While noting the central bank of Vietnam's announcement to monitor the reference rate relatively flexible in the coming time, the Singapore-based DBS

suggests that the dong is likely to move towards a depreciation path with more frequent changes in the reference rate.

In USD/VND terms, DBS expect the official reference rate to end this year at 21500 after it was lifted to 20693 from 18932 last Friday. Given that the trading

band was also narrowed to ±1% from ±3%, the spot rate is likely close this year at 21720 instead of the bank's previous forecast of 20520.

DBS believes that there is a need to maintain vigilance over Vietnam's efforts to restore macroeconomic stability.

The bank noted that international ratings agencies have not lifted their negative outlook on the country's long-term foreign currency debt ratings, which

were downgraded last year.

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