Updated data of the State Bank of Vietnam (SBV) showed that by the end of last week, the average dong (VND) interbank rates fell significantly on short terms compared to last Apr/
Up to May 17th, the VND rates were only 1.16 percent per annum on overnight term, 1.31 percent per annum on one-week term, 1.49 percent per annum on two-week term, and 1.95 percent per annum on one-month term, etc.
Previously, in late April 2018, the interbank rates tended to rise. The average overnight rate once reached 2 percent per annum.
However, with the return of the downtrend in mid-May, the VND interbank rates continued to be relatively stable in low zone compared to the same period of 2017.
Specifically, in May 2017, the VND interest rates on the interbank market recorded fairly high levels, reaching up to 4.2-4.5 percent per annum on overnight term.
The above situation is associated with the continuous and large foreign currency purchase of the SBV implemented throughout late 2017 until now, along with a large amount of VND poured out to buy foreign currency.
In addition, despite having changes compared to the same period of 2017, the disbursement of public investment remains slow compared to the annual plan. A large amount of deposits of the State Treasury is still located in the banking system, which has great impact on the liquidity of the system and interest rates.
The slow public investment disbursement and the large deposits of the State Treasury in the banking system have caused the government bond issuance to be lower than the targeted plan. Specifically, in the first four months of 2018, the State Treasury successfully issued 46.462 trillion dong of bonds, just equivalent to 23.2 percent of the annual plan in 2018. Although the average VND interbank rates were at low levels, and lower than the US dollar (USD) interest rates on the same market, the USD/VND exchange rate remained stable.
In the past week, the SBV continued to strongly raise the reference exchange rate from 22,548 VND to 22,590 VND per USD. This move matches the strong upward momentum of the USD-Index on the world market in recent days. Being in tune with this development, the USD prices listed by commercial banks were also slightly increased during the week from 22,800 VND to 22,815 VND per USD (selling rate). The USD exchange rate on the interbank market also inched up to around 22,775 VND per USD from 22,765-22,770 VND per USD in the previous week.
