HANOI, Vietnam (AP) — Vietnam doubled the trading band of its currency Wednesday to allow it to weaken following an unexpected devaluation of the Chinese yuan.
The State Bank of Vietnam said in a statement that the dong can now be traded in a band 2 percent above or below the central bank-set reference rate compared with 1 percent before.
The announcement comes after the People's Bank of China devalued the tightly-controlled yuan by 1.9 percent on Tuesday, its biggest one-day fall in a decade, and let it drop another 1.6 percent Wednesday.
China's government said the devaluation was part of reforms meant to make its exchange rate more market-oriented. But the decision accentuated worries over the health of the world's second-largest economy following a slump in exports, pulling shares, Asian currencies and prices of oil and other commodities sharply lower.
Vietnam's central bank said the yuan's devaluation will have a "negative impact on the Vietnamese economy" because of the substantial trade between the two countries that is tilted in favor of China's exports.
Two-way trade was $59 billion last year in which Vietnam recorded a deficit of $29 billion.
The devaluation will "help the dong to be more flexible and be proactive in coping with the negative impacts in international markets and ensure the competitiveness of Vietnamese products," the central bank said.