How Is the Vietnamese Dong Revalued?


Quick Answer

The Vietnamese dong is revalued every time the supply of it and demand for it fluctuate or when the Vietnamese government prints more of it. Although this is also true of every world currency, the Vietnamese dong is one of the most unstable currencies worldwide.

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Full Answer

The dong underwent a heavy devaluation against the U.S. dollar after 2005, dropping to around 35 percent lower by 2014 than it was in 2005. The Vietnamese government increased the supply of dongs from 2005 by 40 percent, decreasing the value of the dong. Factors such as the price at which foreign investors are willing to sell the dong also affect value. Like the Iraqi dinar, the Vietnamese dong is mostly illiquid, meaning it is much easier to buy than to sell. The dong's volitility and unpredictability also affect how quickly it loses its value.

For example, as of 2015, a U.S. bank recently bought dongs with dollars at an exchange rate of approximately 17,000 dongs for the dollar. In just a few days, the exchange rate had risen to over 20,000 dongs per dollar at a Vietnamese district. This meant the bank incurred a loss of 20 percent right after the initial transaction. Such quick devaluation makes the dong a very risky and potentially foolish investment, although those who already have them in possession may be able to declare losses as tax deductions.

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