HANOI, Vietnam (AP) -- Vietnam devalued its currency by 1 percent Friday in an effort to boost its foreign exchange reserves and exports.
A statement on the State Bank of Vietnam's website said the U.S. dollar will now buy 21,036 dong, which is a devaluation of 1 percent from the previous official rate of 20,828 dong per dollar.
It is the first devaluation of the dong since November 2011.
The statement said the devaluation is part of a government plan to "improve the balance of payments and foreign exchange reserves."
Some analysts say Vietnam's currency is overvalued but the country's financial system is not yet developed enough for it to trade freely without damaging the economy.
Commercial banks in Vietnam are allowed to trade the currency in a 1 percent band around the central bank-set rate.
Vietnam's economic fortunes have waxed and waned in the past decade. Once seen as one of the most promising emerging economies in Asia, it has more recently suffered from bouts of high inflation and slowing growth as the Communist Party government struggles to reduce the dominance of inefficient state companies.
Former government economic adviser Pham Chi Lan said the devaluation will help to boost the country's exports and bring the dong closer to its real market value.
"Vietnamese exporters, particularly farm exporters will enjoy more benefits" as a result of the dong devaluation, she said.
Some experts had suggested a bigger devaluation was needed, but Lan said the 1 percent drop was appropriate in the current circumstances as it will not create chaos in the market.
- Politics & Government
- Budget, Tax & Economy
- State Bank of Vietnam
- foreign exchange reserves