Recent reports of Bao Viet Securities Joint Stock Company (BVSC) said that last week (June 3-7, 2019), interbank interest rates continued to decline in most of the terms. The overnight term, one week term and two week term decreased by 0.1 percent to 0.15 percent to 2.85 percent per year, 2.95 percent per year and 3.2 percent per year respectively.
BVSC believed that the current liquidity was still relatively positive, combined with the net pumping activity of the State Bank of Vietnam (SBV) last week helped the interbank interest rates continued to fall slightly. Credit growth was low, as well as public investment disbursement (disbursement in the first five months only reached 96.899 trillion dong, equivalent to 23.25 percent of the annual plan). These were the main reasons why the liquidity in the system was still quite redundant.
However, the dong interbank interest rate remained low, resulting in a narrowing of interest rates between dong and US dollar. This posed a potential risk to exchange rates when banks could shift positions to hold US dollar.
In addition, BVSC experts believed that the international context related to Chinese yuan was still very unpredictable in the near future. This might be the reason why SBV had to use the treasury instruments,, with the release of tens of billions of dong in the past time, to strongly absorb dong.
On that basis, interbank interest rates were expected to fluctuate around three percent in the near future. It was difficult to further decrease. In addition, good interbank liquidity helped banks stabilise. Banks even reduced deposit rates in short terms (less than six months). Long-term deposits (over 12 months) would be difficult to reduce due to the impact of capital restructuring needs to meet regulations. Meanwhile, lending interest rate of commercial banks often refer to 13-month term deposit rates.
“Therefore, we think that it is difficult to expect interest rates to be reduced in the near future”, BVSC said.
On the foreign exchange market, the central exchange rate in the past week decreased by 7 dong to 23,058 VND/USD. And the exchange rate at commercial banks decreased by 17 dong, from 23,418 VND/USD to 23,398 VND/USD. From early 2019 until now, dong decreased by about 0.7 percent compared to US dollar.
The analysis group said that the exchange rate in the past week was no longer under pressure when the US dollar index dropped relatively strongly. In terms of domestic macro-economy, Foreign Direct Investment (FDI) and export capital recovered again (thanked to the expectation of Samsung’s operation would benefit from Huawei’s difficulties). These would be factors that helped the exchange rate fluctuate under the control of SBV (about two percent depreciation for the whole year of 2019).
