Hanoi - On May 28, a currency analyst at Morgan Stanley released a report that hit Vietnam's financial community like a smack in the face.
With Vietnam's inflation and trade deficit soaring, the analyst wrote, its currency was under threat. Twelve-month futures on the Vietnam dong had "gapped" to 23,000 to the dollar, a 50 per cent premium on Hanoi's official rate of 16,600. If Vietnam did not allow rapid depreciation, the dong would likely collapse by year's end.
The Morgan Stanley report was just one of a rash of gloomy mid- year Vietnam reports. Deutsche Bank predicted a 30 per cent fall in the dong. Merrill Lynch said Vietnam was experiencing an "inflation shock" that could prompt massive capital flight.