SSI Research: savings interest rates may increase by 50 basis points

02-Jul-2021 Intellasia | NDH | 7:05 AM Print This Post

The analysis team of Saigon Securities Incorporation (SSI Research) has released the capital market report in the week of June 21st 25th, mentioning that the Open Market Operation (OMO) had no new transactions and interbank interest rates increased slightly, closing the week at 1.227 percent per annum (up by nine basis points) on overnight term and 1.366 percent per annum (up by three basis points) on one-week term. Commercial banks’ limited the supply of dong when the end of the quarter is approaching may cause the interbank interest rates to further inch up during the week.

According to the State Bank of Vietnam (SBV), from the beginning to June 15th, the credit growth of the whole economy was 5.1%, which means that credit institutions have pumped out 469 trillion dong, 2.5 times higher than the same period of 2020. Since the credit growth is currently quite strong, if commercial banks are given extension in credit growth limit this week, the growth rate in the first half of 2021 can be six percent.

Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) has raised its savings interest rates for terms of less than 12 months by 20 basis points, equivalent to the rates offered by the three other state-owned banks, after maintaining lower levels since the beginning of the year. the current low interest rate environment makes the deposit-credit gap to be under the pressure of being narrowed and SSI Research maintained the view that savings interest rates may rose by 50 basis points while lending interest rates will remain stable in the second half of 2021.

Chair of the US Federal Reserve (Fed) Powell affirmed that the Fed will not increase interest rates solely because of inflation concerns. The US core inflation rate (PCE) in May rose by 0.5 percent month-on-month and by 3.4 percent year-on-year, in line with market expectations. In addition, the current account deficit of the US reached up to 195.7 billion US dollars in the first quarter the largest deficit since 2007. The US dollar cooled, the US dollar index (DXY) dropped from the two-month peak of 92.2 to move sideways at around 91.8. Most currencies recovered slightly against the US dollar except for Asian currencies, such as Chinese yuan (CNY) with a depreciation of 0.05%, Taiwan New dollar (TWD) with a depreciation of 0.45%, Indonesia Rupiahs (IDR) with a depreciation of 0.44%, Japanese yen (JPY) with a depreciation of 0.49%, and Thai baht with a depreciation of 1.03%, etc., due to the complicated situation of the epidemic.

In Vietnam, the US dollar/dong exchange rate listed at commercial banks remained the same at 22,800/23,110 dong per US dollar but surged by 185 dong per US dollar on buying rate and 145 dong per US dollar on selling rate in the free market, reaching 23,280/23,310 dong per US dollar. While the world gold price fell, the domestic gold price still levelled off in the past week, causing the difference between the domestic and the world gold price to widen from four million dong per tael to over seven million dong per tael, affecting the exchange rate in the free market.

As the supply and demand of foreign currencies in the domestic were relatively balanced, remittances and Foreign Direct Investment (FDI) remained fairly positive, the US dollar/dong exchange rate will be stable in the long term but may be under a pressure of increase in the short term due to the need to transfer profits to home countries of some foreign businesses at the end of the quarter.

 

Category: Finance, Vietnam

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