Dollars' Double Blow From Vietnam And Quatar

The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc. Vietnam, which has mid-sized reserves of $40bn, is seen as weather vane for the bigger Asian powers. Together they hold $3,575bn of foreign reserves, over 65pc of the world's total. China leads with $1,340bn, but South Korea, Taiwan, Singapore, and even Thailand all built up massive holdings. The concern is that once one or two members of the region jump ship, it could set off a broader scramble. None of them want to be the last one left holding a devalued asset. Vietnam's central bank said this week that it would move "gradually" to a floating currency. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia. The move is intended to increase long-term returns for future generations, but it can easily be seen as a vote of no confidence in US economic management. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/03/bcnviet103.xml&CMP=ILC-mostviewedbox

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