State Bank’s US deposit interest rate cut curbs dollarisation
State Bank’s US deposit interest rate cut curbs dollarisation
The State Bank of Vietnam (SBV)’s surprising decision to cut the interest rates on USD deposits on September 27 was welcomed by economic experts, who said the move was a step towards many goals.
With the decision, the USD deposit interest rate is reduced to zero for organisations and 0.25 percent for individuals as of September 28.
SBV Deputy Governor Nguyen Thi Hong said the decision would increase the value of the Vietnamese dong (VND) and contain the dollarisation of the economy.
Economic expert Dr. Nguyen Minh Phong said the move was new and bold. The decision is a basic step to reduce the motivation for USD deposits for profit from organisations and individuals.
Dr. Nguyen Tri Hieu, a banking-finance expert, said the move reduces dollarisation and pressure on the USD-VND exchange rate.
It is an important decision to stabilise the VND, reduce USD speculation, steady the interest rate ceiling and support economic recovery, he said.
Agreeing with Hieu, General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) Le Duc Tho said the SBV decision would help the USD-VND exchange rate and interest rate ceiling remain stable.
For export companies, the news offered them hopes of accessing USD loans at low interest rates.
The decision also eased pressure on the SBV to sell USD, which has been built up by the USD-VND exchange adjustments one month ago, Dr. Phong said.
According to Dr. Phong, the decision could be in preparation for the possibility of an interest rate hike from the United States Federal Reserves by the end of the year.
SBV’s move on USD interest rate eases pressure on market
The State Bank of Vietnam (SBV)’s latest move on lowering the USD deposit interest rates is expected to ease the pressure on the foreign currency market, finance-banking experts said.
The SBV’s decision, which took effect on September 28, reduced the annual interest rate for USD deposits from organisations to zero from the current 0.25 percent while the interest rate for deposits from individuals dropped to 0.25 percent from the current 0.75 percent.
Lecturer Tran Van Thuan from the University of Finance –Marketing of Ho Chi Minh City said recently there is a trend of converting savings in the domestic currency to USD, while businesses try to buy and keep USD in anticipation of exchange rate fluctuations at the end of the year or early next year.
Therefore, the adjustment of USD saving interests could lower the pressure on foreign currency demand and supply, and is a suitable monetary policy instrument at the moment, Thuan said, adding that the move will help stabilise the exchange rate of VND and USD.
Meanwhile, General Secretary of the Banking Association Tran Thi Hong Hanh said the adjustment will help stabilise the country’s monetary market and prevent speculation while ensuring capital mobilisation for manufacturing and business activities.
Following the SBV’s decision, commercial banks including the Bank for Investment and Development of Vietnam (BIDV) and the Military Bank (MB) immediately adjusted the interest rates on USD deposits.
Gold prices have not changed much after the SBV’s adjustments, with the price listed at the Sai Gon Jewelry Company on September 28 afternoon dropping 80,000 VND per tael from late last week’s level.
Meanwhile the green notes were transacted at the same price as last week. Currently, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) has its USD price at 22,445-22,505 VND for 1 USD (buying-selling).
Domestic gold price slides, Greenback rises slightly
Commercial banks altogether shot up the US Dollar price on September 29 while tapering the gold price to under 34 million VND (1,512 USD) per tael.
The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and the Bank for Investment and Development of Vietnam (BIDV) posted their US dollar buying and selling prices at 22,450 VND – 22,510 VND, 5VND higher.
The Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) added another 10 VND to each US dollar transaction with the exchange rate listed at 22,445 VND- 22,515 VND.Meanwhile, the Vietnam Technological and Commercial Joint Stock Bank (Techcombank) applied the dollar’s buying and selling rates of 22,420 VND – 22,520 VND, 20 VND higher than September 28.
The State Bank of Vietnam (SBV) recently decided to reduce the annum interest rate to zero percent for USD deposits by organisations and 0.25 percent for individuals. The SBV said the decision has no effect on the liquidity of foreign currency.
According to Vietinbank Director General Le Duc Tho, stellar liquidity has been seen within the Vietnamese commercial bank system in general and Vietinbank in particular. He said that thanks to the SBV’s adjustment of foreign exchange rates, foreign currency’s liquidity has been improved in the banking sector while foreign currency loans have been controlled safely.
On the same day, the gold price at the Saigon Jewellery Company (SJC) fell by 100,000 VND (4.48 USD) for one tael from the previous day with buying and selling prices pegged at 33.67- 33.89 million VND (1,497-1,507 USD).
Bao Tin Minh Chau Jewellery Company reduced 50,000 VND (2.24 USD) per tael of gold’s buying rate, dropping it to 33.79 million VND (1,502 USD) and selling for 33.85 million VND (1,505 USD), 70,000 VND (3.1 USD) higher over yesterday’s rates.
In the international markets, gold prices tended to fall dramatically over the US employment report expected to be announced this weekend, which could enhance the possibility the Federal Reserve will hike interest rates within the year.
