US dollar supply tightens
14-MAY-2008 Intellasia | Lao Dong
May 14, 2008 - 7:05:00 AM
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Although the US dollar/dong forex rate last month did not change suddenly like in March, but the US dollar now is of worth for banks and enterprises because the deposits in foreign currency is getting scarcer while the borrowing demand of US dollar of businesses is increasing sharply.
By the last weekend, the interbank forex rate announced by the State Bank of Vietnam was 15,991 dong per US dollar. At commercial banks, the listed exchange rate stood at 16,145-16,151 dong/US dollar, rising nearly 10 dong/US dollar against the previous day.
In HCM City's informal market, the forex rate is higher than that of banks. US$1 can be exchanged to 16,250 dong. However, the foreign currency trading in the market has gotten gloomy during the last two months due to the shortage of US dollar.
On the other hand, people are not keen on keeping US dollar anymore but they have shifted to buy gold or deposit dong at banks with a high interest rate. As compared with the dong, the US dollar deposit rate only equals a half (6% per annum) excluding sudden changes in forex rate.
In Jan-Feb, the monetary market used to be so abundant in US dollar that many banks had to call for SBV's help of purchasing US dollar to boost the foreign currency flow and pumping US dollar into the market to support banks' transparency for the fear of dong shortage.
But to date when the US dollar deposit is getting scarce, foreign currency amount put into banks' business does not remain abundant like previous. A lot of enterprises are waiting for an expected increase in forex rate instead of selling US dollar right after collecting foreign currency from exports whereas importers are at high demand of US dollar to buy equipments or materials. Recently, after SBV granted additional gold quota of 3.5 tonnes to enterprises and banks, the need for US dollar is rising considerably,
SJC's deputy general director Truong Cong Nhon said that it is so hard to buy US dollar at the moment. SJC had to buy 16,300 dong/US dollar but this has not yet met the gold import demand. Moreover, the US dollar scarcity is becoming a significant problem as the trade deficit in Jan-April ballooned to US$11 billion (export turnover reached US$18.26 billion and the import spending was recorded at US$29.36 billion).
According to Pham Trung Cang, vice chair of ACB's credit council, currently ACB is short of US dollar as well to meet importers' demand. During the first four months of this year, the bank's US dollar raising slowed down while the number of customers borrowing US dollar loans is soaring. So ACB lent all 80% of total US dollar deposit.
However, Cang added, ACB also only provided US dollar loans to traditional and big customers with Letter of Credit for goods import. As for new customers, the bank has to consider borrowing applications carefully and cautiously, even refuse providing credit because the dong interest rate remains higher than US dollar rate.
Capital mobilisation in dong is very difficult at present but that in US dollar is more difficult, said EAB general director Tran Phuong Binh. Even EAB had to reject many US dollar borrowers because of the US dollar scarcity.
As stated by Vietnam Eximbank's vice general director Dao Hong Chau, in some recent months, the bank's US dollar mobilisation has faced obstacles because of an increasing number of customers want to change US dollar deposits to the dong deposits with a higher interest rate since the end of February.
To attract the US dollar capital from residents, between the end of April and the start of May, a slew of banks have launched various promotion programmes along with VNBA's negotiated interest rate of US dollar of 6% per annum.
As compared with the basic rate of US dollar at 2% per annum announced by US Federal Reserve Department, Vietnamese banks' US dollar interest rate is higher three times.
SBV announced it would continue pumping US dollar into the market, but according to a bank's general director, the amount is inconsiderable. Most recently, Military Bank issued US dollar bills of exchange with plus interest rate between May 6 and July 6 under the cash payment or account transfer. The book entry bills have a term of 3-11 months with the minimum face value of US$100 and the multiple of US$100 and the coupon rate of 5.8% per annum in order to raise capital in foreign currency.
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