In the week from September 13th to 17th, the interbank interest rate level maintained a slight decrease of about 0.02 percentage point, closing the week at 0.68 percent per annum on overnight term and 0.8 percent per annum for one-week term. This movement showed that the liquidity of the system is still fairly abundant.
Meanwhile, according to the latest data from the State Bank of Vietnam (SBV), the credit growth in the first eight months of 2021 reached 7.4%, much higher than the 4.8 percent recorded in the same period of last year.
With the current credit growth rate, the interbank interest rates can hardly return to the low levels in 2020 despite the abundant liquidity. At the same time, as they have fallen deeply compared to the Open Market Operation (OMO) interest rate of 2.5 percent per annum, commercial banks still do not need support from the SBV.
However, as the last month of the third quarter (Q3) of 2021 the seasonal time in the interbank market is coming, the dong interbank interest rates will experience unpredictable fluctuations when the liquidity pressure of the system gradually increases.
In related developments, by the end of Q3/2021 is the time when Circular 08/2020/TT-NHNN amending Circular 22/2019/TT-NHNN officially takes effect. The new circular stipulates that the maximum ratio of short-term funds used for medium and long-term loans will be lowered to 37 percent (from 40%).
Under the pressure of the new circular, the savings interest rates in the market recorded unusual fluctuations. Contrary to the trend of reducing savings interest rates of the majority of banks, small banks such as Bao Viet Commercial Joint Stock Bank (BaoVietBank), Petrolimex Group Commercial Joint Stock Bank (PGBank) have raised their rates. It is expected that from now until the end of Q3/2021, some other banks will increase savings interest rates in order to ensure the compliance with the new regulation.
However, the unusual or unpredictable movements of the interbank interest rates and savings interest rates are only in the short term. In the long term, these rates are under no pressure to increase.
Notably, according to Saigon Securities Incorporation (SSI), “although the gap between mobilisation and lending has continued to narrow since November 2020, this gap has not really created any pressure and we maintain our forecast that savings interest rates will continue to move sideways or even go down if the SBV needs to take stronger monetary policy easing measures to support the recovery of the economy after the pandemicâ€.
Regarding the market movements in the last week, the positive economic data of the foreign exchange market in the week reinforced the recovery momentum of the US economy and increased expectation that the US Federal Reserve (Fed) may reduce the scale of asset purchase sooner. This increased the US dollar and the US government bond yields. Most major currencies depreciated against the US dollar, such as the euro (negative 0.75%), British pound (negative 0.71%), Canadian dollar (negative 0.57%).
In Vietnam, the US dollar/dong exchange rate listed in commercial banks levelled off last week, closing the week at 22,640/22,870 dong per US dollar.
The trade balance in August 2021 saw a trade deficit of over 100 million US dollars but it is more positive than the estimates of the General Statistical Office (which was 1.3 billion US dollars), showing that production activities have partially recovered in the second half of August. The government is gradually reopening the economy, so the trade balance is likely to improve at the end of the year, while the remittance flows usually increase considerably in the end of the year.
“The supply and demand of foreign currencies in the market will be relatively balanced and help the US dollar/dong exchange rate maintain a stable state,†said that research team at SSI.
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