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Expensive dollar forces US$ deposit interest rates down
While VND deposit interest rates keep escalating, US$ deposit interest rates are decreasing as the dollar price increases have led to an increase of US$ deposits.
As banking experts expected, US$ deposit interest rates have begun declining as banks have excess US$ capital.
Eximbank, which specialises in providing foreign currencies to importers and exporters, on June 23 officially announced it was cutting US$ deposit interest rates from 7% per annum to 6.5% per annum on 12-month term deposits. The rates for other term deposits have also decreased by 0.5-1% per annum. The bank is now offering 5.8% per annum on 3-month and 6% on 6-month term deposits.
The sharp increases of the dollar’s value recently have prompted people to convert VND to dollars and make US$ deposits at banks, which allows them to protect their assets from the VND devaluation and get relatively high interest rates.
The wave of making US$ deposits has helped banks get profuse US$ capital. Meanwhile, banks do not have a lot of clients who want to borrow dollars at this moment, because the skyrocketing prices of the dollar have made businesses hesitate to borrow in dollars. The businesses think that the lower interest rates of US$ loans compared to VND loans would not cover the possible losses in the event of further dollar price increases. What is happening now seems to be absolutely contrary to what happened in the first three months of the year.
Dao Hong Chau, Deputy General Director of Eximbank, said that the bank’s US$ capital liquidity in June is better than one month ago. Meanwhile, the demand for US$ loans by businesses has decreased.
Currently, the VND loan interest rate is 21% on average and US$ loan interest rate 10-12%. However, businesses could suffer heavy losses if the dollar dramatically increased in price. For example, businesses that borrowed dollars in April when the exchange rate was VND16,000/US$1, would incur the loss of VND3,000/US$ if they pay debts now, as the dollar price has hit VND19,000/US$1.
Nguyen Dinh Tung, Deputy General Director of VIB Bank, said that the capital liquidity of the bank’s foreign currencies was greater as people are rushing to buy dollars.
Tung said that banks would adjust US$ deposit interest rates soon as banks need to cut expenses as the way out for US$ capital has been narrowed.
Deputy Chairman of ACB Pham Trung Cang said that if other banks slashed deposit interest rates, ACB would follow the move.
Cang said that businesses are hesitating to borrow money in foreign currencies as the exchange rate fluctuates all the time. Cang runs the Tan Dai Hung Plastics Company, which imports plastic materials to make products for exports. Therefore, he well understands the difficulties of borrowers in the context of the stronger dollar against VND and high interest rates.
The exchange rate on the black market hit the VND19,500/US$1 level, while the rate at which banks sell dollars to businesses is the same, though banks’ quoted prices still hover around VND16,620/US$1.
Currently, Ocean Bank remains the one that offers the highest US$ interest rate of 8.4% per annum. Meanwhile, FED’s key interest rate is now 2% per annum.
VNN
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