Currency rankings tell a tale of two Asias. The Malaysian ringgit is up 8 per cent so far this year against the dollar, the Thai baht and the Indonesian rupiah are both up 5 per cent while even the Chinese renminbi is gingerly gaining ground. Vietnam’s currency, however, is moving in the other direction. After yesterday’s 2.1 per cent devaluation, the benighted dong is down 5 per cent against the dollar. Some old habits are hard to break.

Vietnam is different. It runs a fairly substantial trade deficit, so it depends on remittances and direct investment to stay afloat. As a percentage of gross domestic product, exports are more than double those of Indonesia or Thailand. Mercantilist thinking demands a lower, exporter-supporting currency. So does the active black market in currency in Ho Chi Minh’s gold shops. The central bank’s latest move – following the weakening of the midpoint of the dong’s dollar trading band by 5.4 per cent last November and a similar 3.4 per cent drop in February – has brought the official rate closer to the unofficial one. That should hopefully tame volatility for now.

However, protecting exporters may have unwanted side-effects. On Barclays Capital estimates, every 1 per cent move in the dong versus the dollar adds roughly 15 basis points to inflation. Worse, the willingness to devalue only encourages investors and Vietnamese citizens (who already keep a large proportion of assets in foreign currencies and gold) to shun the local currency. As the dong touched a record low of 19,395 to the dollar yesterday, forward derivatives implied a break through 20,000 within three to six months.