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It is a literal translation of the Sino-Vietnamese phrase "Tử cấm thành": Tử means Purple, Cấm means Forbidden, and Thành means City. "Purple" here refers to the Purple Forbidden enclosure, a group of stars in Chinese constellations, the legendary residence of the Emperor of Heaven. It should be noted that the Purple Forbidden City has only been so called since 1822; before that, it was called "Palace City".
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The Purple Forbidden City in Hue is an imitation of The Purple Forbidden City in Beijing, since the Vietnamese Empire was an imitation of the Chinese Empire. According to Wikipedia, "purple" is (for some reason) the Chinese name of the North star, believed to be the home of the Celestial Emperor.