HSBC's Yetsenga Says Wider Band Eases Concern Dong Will Plunge

Richard Yetsenga, a strategist at HSBC Holdings Plc in Hong Kong, comments on the Vietnamese dong after the central bank widened the currency's trading band to 2% against the U.S. dollar from today.

``The announcement has the potential to be a source of stability for the Vietnamese market.

``It clarifies the exchange-rate mechanism and reduces the risk that onshore entities become concerned about uncontrolled depreciation. If you have a currency band and then allow the unofficial rate to go outside the band, then you undermine your own credibility.

``Unfortunately, turnover in the onshore market today is very low. The key to yesterday's move being a success is that the State Bank of Vietnam intervenes in amounts which are sufficient to keep the spot within their new band.

``I don't know whether they have intervened but they need to. I think they have plenty of reserves to intervene, if the macro fundamentals are sound.

``The dong has already traded to the top side of the new band today.'' (Bloomberg)