US dollar supply for banks on increase

Two weeks after the State Bank of Vietnam limited US dollar saving rates for individuals at 3 percent per year and raised the compulsory reserve ratio for US dollar by 2 percent, more and more enterprises and residents have raced to sell US dollar and shifted to save the dong, according to VnExpress.

Deputy general director of a HCM City-based commercial bank said that US dollar volume transferred on accounts at his bank since the start of this year has doubled than previously. Noticeably, a sudden increase in US dollar cash that bank could purchase mainly came from residents. In only one week, the bank bought more than $15 million against $1-2 million in previous weeks.

Supply of US dollar is increasing strongly at commercial banks, showing that both enterprises and residents have boosted sales of US dollar to banks. This directly has made US dollar/dong forex rate continuously corrected.

At Asia Commercial Bank (ACB), on April 23 it listed US dollar at below 20,800 dong (both selling and buying prices), particularly US dollar was purchased at 20,700 dong and sold at 20,790 dong. By the end of that day, the selling price was unchanged but the purchase continued being reduced by 20 dong to 20,680 dong per US dollar. The gap of selling-buying prices was expanded to a record of 110 dong.

The movement, an economist said, from US dollar to the dong partially has eased the tense demand of the dong. Value of the dong last week signaled to be recovered. As a result, the interest rates of dong and US dollar may go down in the near future.

A leader from the SBV-HCM City arm spoke at the conference “Vietnam’s financial market and monetary development policy” held on April 23 that the higher US dollar flow into the market would cause many impacts because after purchasing, banks will re-supply US dollar to the market. Therefore, the SBV in the near future could use additional swaps.

Another expert proposed the Central Bank to balance supply and demand of US dollar by issuing high-yield bonds to collect US dollar from residents and enterprises.

SBV should announce clearly the basket of currencies used in determining forex rate, which will help Vietnamese enterprises change their currency using behaviours, according to Dr Hoang Cong Gia Khanh, Finance-Banking Faculty of Economic-Law College, HCM City National University. Thus, enterprises can minimise affects from US’s monetary policy and changes in value of US dollar. – Vietbiz24

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial