Vietnam interbank rate skyrockets

Several banks majority held by the State chased up the inter-bank interest rate by around one percentage points on Thursday, pushing the overnight rate on the market to some 5%-6% a year compared to a mere 1% a fortnight ago.

Banks lent to one another at 5%-6% for overnight and one-week terms, 6% to 6.5% for terms of two to three weeks, and up to 7.5% for one-month terms, said analysts of the Bank for Investment and Development of Vietnam (BIDV).

BIDV experts said the inter-bank market had become more bustling since early this week, and the rate has now approached the deposit rates at commercial banks. Most transactions centered on short-term loans of less than one month.

Sources from Vietcombank attributed the inter-bank rate rise to a rate cut for short-term deposits that resulted in short-term money being drained out of banks. Furthermore, banks now prefer holding the U.S. dollar instead of selling the greenback to the central bank as seen in previous weeks, they said.

“We’ve learned that some banks use Vietnam dong from the inter-bank market to purchase the U.S. dollar from the central bank, which has driven the inter-bank interest rate to increase by 0.5-1.5 percentage points,” said a Vietcombank analyst.

On Wednesday, the State Bank of Vietnam injected a net 118 billion dong via open market operations and an additional 185 billion dong on Thursday.

On the forex market, the dollar fluctuated, easing to 20,950 dong in the morning but rising to 20,964 dong in the afternoon, with banks purchasing US$250 million and selling US$230 million. The formal forex rate stayed unchanged at 20,828 dong to the dollar.

A source said most banks had low forex reserves and therefore the dollar shortage will be hardly resolved via the inter-bank market. However, the central bank said last week it would keep Vietnam dong stable, not to depreciate by more than 3% against the U.S. dollar this year.-- Saigon Times

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