According to calculation of Saigon Securities Incorporation (SSI), after four consecutive months the State Bank of Vietnam (SBV) bought foreign currencies, the foreign exchange reserves have reached a record high level of about 73 billion US dollars.
As VnEconomy reported, the US/dong exchange rate moved sideways during the previous week on the interbank market and free market. In particular, the interbank exchange rate closed the week at 23,200 dong per US dollar.
However, in the first trading session of this week, the interbank exchange rate remained only 23,199 dong per US dollar. Although it was only a dong less than the previous session, this exchange rate level has broken the buying threshold of the SBV.
Assessing the above development, experts said that Vietnam is having an abundant foreign currency source from trade surplus, Foreign Direct Investment (FDI) inflows and large capital trading and business cooperation deals.
On the other hand, the purchase from the operator must be calculated carefully to avoid being listed as a currency manipulator by the US. Thus, there will be times when the interbank exchange rate falls below 23,200 dong per US dollar.
Actual statistics of SSI’s expert group pointed out that the SBV’s purchase amount in the last four months was fairly large but still lower than the first four months of the year.
The group stated that “the foreign exchange reserves are at a record high level of 73 billion US dollars and are expected to see further increase. The US dollar/dong exchange rate will continue to move sideways in the current zone.”
On the interbank market, the average dong interest rate offered on the November 4th session sharply rose by 0.12-0.23 percentage point across all terms, reaching 1.95 percent per annum on overnight term, 2.15 percent on one-week term, 2.27 percent on two-week term, and 2.57 percent on one-month term.
Thus, the interbank overnight rate was lower than the treasury bill interest rate during the last month. With exchange rate and inflation under good control, it is likely that the operating rate (bill rate) will be cut by 25 percentage point for the rest of 2019, particularly after the interest rate cut (to 1.5 percent1.75 percent per annum) of the US Federal Reserves (Fed).
However, the interest rates on market 1 were not much influenced by operating rate or interbank developments but impacted by the demand for credit financing in the peak quarter as well as the requirements on capital structure which take effect from 2020.
Except for two banks in the group of four state-owned banks that have cut deposit rates by 20-30 percentage point, even for long-term of 12 and 13 months, most of the deposit rates of other banks levelled off. Some banks with small market share continued to mobilise capital at 8.2-8.5 percent per annum on terms of 13 months or more, or boosted mobilisation through the issuance of certificates of deposits on terms from 24 months or more at interest rate of nine to 10 percent per annum. The deposit rates are popularly ranging around 4.1-5.5 percent per annum for terms of less than six months, 5.307.8 percent per annum for terms from six to less than 12 months, and 6.4-8.1 percent per annum for terms of 12 and 13 months.
Regarding the Open Market Operation (OMO), on November 4th, the SBV reduced the bill offer to eight trillion dong, on a term of seven days and interest rate of 2.25 percent. Credit institutions absorbed almost this entire volume. On the same day, 12 trillion dong of bills matured.
Thus, the SBV continued to net injected four trillion dong to the market via bill channel, bringing the volume of bills in circulation down to 48 trillion dong. The operator also maintained an offer of one trillion dong on mortgage channel, with a seven-day term and interest rate of 4.5 percent per annum. However, no winning volume was recorded.
