Interest rates may further fall by 10-30 basis points

01-Oct-2020 Intellasia | NDH | 7:44 AM Print This Post

Saison Securities Incorporation Analysis Research (SSI Research) has released the monetary market report for the week of September 21st 25th. The report mentioned that the State Bank of Vietnam (SBV) did not make any transactions on the open market operations (OMO), and interbank interest rates remained stable at 0.18 percent per annum on overnight term and 0.23 percent per annum on one-week term.

As of September 16th, the credit growth was 4.81 percent compared to the beginning of the year, equivalent to about 8.9 percent compared to the same period of 2019 and is still far from the original target of 14%. Although the lending rates have been reduced considerably, the credit demand remained fairly weak. Even for priority areas (such as small and medium enterprises, agriculture, export), the credit growth was also three to four percent. This reason led to the system liquidity abundance in the banking system, causing the deposit interest rates to sharply decline and may fall further by 10 30 basis points in the near future.

On the foreign exchange market, the US dollar rebounded strongly in the international markets, causing the US dollar/dong exchange rate to inch up slightly. The unpredictable developments of the Covid-19 pandemic in the world, the concerns about risks and less relaxed statements of some members of the US Federal Reserve (Fed) made the demand for US dollar to increase.

The US dollar index (DXY) increased strongly from 92.9 to 94.6, the peak level in the last two months, and also the strongest week of US dollar appreciation since early April 2020 until now. The key currencies all fell against the US dollar, such as euro (down by 1.77%), British pound (down by 1.32%), Japanese yen (down by 0.97%), Chinese yuan (down by 0.81%), Swiss Franc (down by 1.83%), Korean won (down by 0.81%), etc.

The international market developments and the low level of dong/US dollar interest rate difference made the listed US dollar/dong exchange rate of commercial banks to inch up by 10 dong per US dollar to 23,070/23,280 dong per US dollar, and increased by 50 dong per US dollar on the buying side and 30 dong per US dollar on the selling side on the free market, reaching 23,220/23,230 dong per US dollar. The central exchange rate increased by 23 dong per US dollar to 23,218 dong per US dollar.

According to the general Department of Customs, Vietnam continued to record a trade surplus of nearly one billion US dollars in the first half of September, raising the total trade surplus from the beginning of the year to mid-September to a record high level of 14.5 billion US dollars. Since the domestic foreign currency supply of demand remain fairly favourable, SSI Research believes that the US dollar/dong exchange rate will not see much change in the short term.


Category: Finance, Vietnam

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