HANOI. Aug 7: Vietnam effectively devalued its currency by about 7 per cent Friday, the fourth cut in the last year as the government continued its go-slow approach to avoid the precipitous plunges that have ravaged other Asian countries, says AP.

The devaluation was part of a two-step move that began late Thursday when the State Bank of Vietnam narrowed the trading band within which the dong can trade from 10 per cent to 7 percent.

On Friday morning, the bank set the target rate at 12.998 dong to the dollar from 11.815 on Thursday, making the new floor 13.907. The dong has been constantly trading at the low mark of the trading band all year.

Immediate reaction was confusion. Analysts have been predicting another cut was imminent for months, but many still were caught off-balance by the state banks moves.

One trader said JuSt after trading opened Friday that the prices were "crazy'' and that no one was quoting rates.