Vietnam prepares to prop up currency, ready to sell greenback

Pham Thanh Ha, head of the State Bank of Vietnam’s monetary policy department, said: "The dong has weakened in recent days because of concerns over new developments in the U.S.-China trade negotiations."

The dong has weakened 0.9 percent this year and has fallen nearly 2.8 percent from a year earlier, according to provider of financial markets data and infrastructure Refinitiv Eikon, formerly the Financial & Risk business of Thomson Reuters.

The decline of the Chinese yuan since late April has had a strong impact on market sentiment, putting pressure on the dollar-dong exchange rate, Ha said.

The yuan fell to its weakest level since December on Friday, and sources said China’s central bank will use monetary policy tools to stop yuan weakening past the key 7-per-dollar level in the near-term, according to Reuters.

The central bank kept the dollar-dong reference rate unchanged at VND23,066 on Wednesday, after the Vietnamese currency weakened by VND15 the previous day.

In a report last week Bao Viet Securities had said the volatility in the foreign exchange market was the result of escalating trade war between the U.S. and China.

"The SBV will continue to slightly depreciate the dong to accommodate sudden changes in the global market."

It also predicted the USD/VND exchange rate to fluctuate within a range of 2 percent this year, a band authorities have allowed in previous years.