The dong will decline 1.4 percent to 20,900 per dollar by the end of 2011 and reach 21,400 by the end of next year, according to a Credit Suisse research note released today, which also said the currency's recent steadiness was driven more by administrative measures than monetary tightening.

"A combination of higher inflation, slower growth, and signs of financial distress are likely to spark concerns among investors in the coming months," wrote Santitarn Sathirathai, a Singapore-based economist at Credit Suisse.

The dong slid 0.2 percent to 20,613 per dollar as of 3:43 p.m. in Hanoi, the biggest decline since May 25, according to data compiled by Bloomberg.

The currency, which was devalued in February for the fourth time since 2009, has traded between 20,346 and 20,760 per dollar this month, a range of less than 2 percent, according to data compiled by Bloomberg. Vietnam's central bank said this month it would increase the reserve-requirement ratio on US dollar deposits by a percentage point, while also cutting the interest- rate cap on dollar deposits for individuals to 2 percent from 3 percent and that for institutions to 0.5 percent from 1 percent.

Yields on benchmark five-year bonds rose nine basis points, or 0.09 percentage point, to 12.63 percent, according to a daily fixing from banks compiled by Bloomberg.

The State Bank of Vietnam set the reference rate at 20,618 per dollar today, unchanged from yesterday, its website showed. The currency is allowed to trade up to 1 percent on either side of the official rate.

Bloomberg - June 18, 2011