Vietnam's dong falls to record low despite strong PMI data as dollar rally continues

Despite data revealing increasing strength in the manufacturing sector, the Vietnamese currency fell to a new record on 5 January with the dollar continuing its advance.

USD/VND rallied to 21553 on Monday, an all-time high for the pair, from its previous close of 21394, making a 0.7% loss for the dong.

The HSBC/Markit purchasing managers' index recorded 52.7 in December up from November's 52.1 and the highest reading since April. Markit said that growth has now been registered for 16 months in a row.

"We believe that the manufacturing sector will benefit from both wage cost competitiveness and lower input prices, thanks to declining global brent costs. We expect output to continue to expand in the coming months, with some seasonal slowdown due to the Lunar New Year," said Trinh Nguyen, HSBC Asia economist.

The US dollar index rose to a new multi-year high of 91.47 from 91.12 at Friday's close.

Traders said it is euro-negative news rather than dollar-positive news pushing the index higher these days.

Meanwhile, Mario Draghi, the president of the European Central Bank, said last week that policymakers have to act against deflation risks and added that estimating how much the government has to spend on buying bonds is difficult.

The euro fell near a nine-year low on Monday with the dovish ECB remarks weighing. EUR/USD traded as low as 1.1866, lowest since March 2006, before edging back up to 1.1940, still 61 pips below the previous close.