Vietnam is on the brink of a currency collapse that could mirror the rout of the Thai baht that sparked the Asian crisis in 1997, economists say.

The State Bank of Vietnam effectively devalued the dong by 2 per cent against the dollar last week, a move that analysts said was designed to head off a speculative attack on the currency.

The move highlighted concerns that Vietnam, where consumer price inflation is running at more than 25 per cent, is poised to suffer an exodus of foreign-controlled capital. The country's benchmark equities index has lost 60 per cent of its value since January, making it the world's worst-performing stock market. Vietnam's trade deficit for the first five months of the year stood at $14.4 billion (£7.4 billion), compared with a $12.4 billion shortfall for the whole of 2007.

Matthew Hildebrandt, a JPMorgan economist, said that the move would “embolden the view that Vietnam is on the verge of a crisis and larger devaluation”. There has been growing disquiet in Vietnam over the fate of the dong. The country's black market currency exchange rate has reportedly jumped to a record high of more than 18,000 dong to the dollar - well above last week's official rate of 16,268.

Sherman Chan, of Moody's, the investors' agency, said: “A sense of déja vu and fears of skyrocketing inflation are causing individuals and merchants to hoard rice, cement and steel, a return to old habits formed back when annual inflation exceeded 60 per cent.” She added that inflationary pressures had prompted a rush into gold. “The price of gold has tended to be a reliable proxy for the public's assessment of the Government's ability to stabilise the economy. Gold's price in recent months underscores their stunning lack of confidence.”

The situation demonstrates the reversal of sentiment over the Vietnamese economy, which until last year was among the fastest-growing in Asia. In March, 2007, the combined value of stocks on the Ho Chi Minh City and Hanoi stock exchanges stood at about $29 billion - up from less than $1 billion in 2005. Economists say that a recent suggestion by the Vietnamese Government that it has insufficient foreign reserves to fend off an attack from speculators, who may bet on the dong suffering a sudden and sharp drop, was ill-timed.

Ms Chan said: “The bitter lessons of the Thais and Indonesians in 1997 are very clear: even $22 billion can be used up very quickly when the currency is under heavy pressure from determined and well-financed speculators.

“The way to regain credibility is by employing serious tools to attack the roots of the problem - an overheating economy and excessive inflation.”

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