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Dollar price to climb to $18,500/US$ this year?
While US$ interbank interest rates have been decreasing, the VND/US$ exchange rate keeps rising.
US$ interest rates decreasing slightly
According to the State Bank of Vietnam, VND lending interest rates last week were more stable than the previous week. The lending rates applied by state-owned banks last week were between 8.5-10 percent per annum for short-term loans and 10-10.5 percent for medium- and long-term loans.
Meanwhile, the VND lending interest rates offered by joint-stock banks hovered around 10-10.5 percent per annum. Those clients who can borrow money under the 4 percent interest rate subsidy programme only had to pay 4.5-6 percent per annum.
The average VND overnight interest rate was 5.44 percent per annum, a decrease of 0.1 percent over the previous week, while the rates of other terms of loans were between 6.3-8.6 percent.
Meanwhile, the US$ lending interest rate decreased by another 0.3-0.5 percent last week to 4-6 percent per annum. The interbank US$ interest rates also decreased last week from previous weeks.
Deputy Director of a joint-stock bank said that commercial banks had to slash US$ interest rates further in order to push up loans in the context of profuse US$ capital. However, he said that the interbank’s US$ slight decreases would not have big impacts on US$ loans. He said that this is a factor for which commercial banks may consider slashing deposit interest rates further in the time to come, though the current US$ deposit interest rates are considered relatively low.
The expected exchange rate at VND18,500/US$1
Commenting about the VND/US$ exchange rate’s performance recently, Dr Nguyen Dai Lai, senior analyst from the State Bank of Vietnam, said that the exchange rate was stable in the first six months of the year.
Considering import and export turnover decreased sharply in the last few months, one would think that the exchange rate would go down. However, in fact, the VND/US$ exchange rate was stable and sometimes heated up in early May and late June.
In the market, commercial banks have quoted exchange rates at the ceiling allowed, even since the exchange rate trading band was raised from +/-3 percent to +/-5 percent. The fact that commercial banks quote a single level for both purchasing and selling prices and quote at the ceiling levels show that the market is expecting the VND to devaluate more than 5 percent, the ‘quota’ which the State Bank granted for the exchange rate in 2009.
Currently, the VND/US$ exchange rate applied by commercial banks is always at the ceiling level round 17,800-17,802 dong per dollar. The cautious and hesitant exchange rate loosening by the State Bank in the last two weeks brings hopes that the exchange rate may be loosened more towards the year’s end.
According to Dr. Vo Tri Thanh, Deputy Director of the Central Institute of Economic Management (CIEM), people expect the VND/US$ exchange rate to climb to 18,500 dong per dollar.
VietNamNet, VnMedia, LD
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