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Interest rates and exchange rates decreasing together   2008-08-13 - Tuoi tre

Fifteen commercial banks announced lower deposit interest rates last week after slashing US$ deposit interest rates. The VND/US$ exchange rates also decreased further, by 2.2% over the end of June 2008.

 

Interest rate decrease kick-starts

 

 
A lot of banks announced slashed interest rates on very short-term and long-term deposits yesterday. Early yesterday morning, East Asia Bank (EAB) offered new interest rates which saw the sharpest decreases: 0.22-1.1% per annum on 1-2-3 week, 1-month and over 12-month term deposits.

 

The bank has not yet slashed interest rates on 3-6-month term deposits, while the rates for 9-month term deposits had decreased by 0.4% per annum to 18.1% per annum.

 

Nam Viet Bank, after cutting the interest rates on very short-term deposits, has made a third interest rate cut since the end of July 2007 on over-12-month term deposits, applied to clients who deposit less than VND1bil, from 18.5% per annum to 15% per annum.

 

As such, the interest rates on 1-12-month term deposits applied by state-owned and big joint-stock banks are now hovering around 17.5-18% per annum, while smaller banks are offering higher rates for big depositors, with 18.5% at the highest.

 

Together with the VND deposit interest rate cuts, banks have also announced cutting rates for gold and US$ deposits. Asia Commercial Bank, for example, has slashed interest rates for the fourth time within one month, by 0.05-0.45%, to 4-5.7%.

 

Gold deposit interest rates have dropped by 0.2-1.5% with the biggest decrease for 36-month term deposits, from 5.5% to 4% per annum. Commercial banks, including big ones like Agribank and Vietcombank, have cut US$ deposit interest rates by 0.95%-1.5% on all term deposits.

 

Currently, the US$ interest rates offered by the banks are between 4.8% and less than 6% per annum. Meanwhile, smaller banks are offering rates at over 6.5% per annum.

 

Bui Tan Tai, Director of the Individual Clients Section under ACB, said that the interest rate cuts will continue in the coming time. Other bankers also said that banks would slash lending interest rates in some months.

 

Dollar prices lower than inter-bank official rates

 

On August 11, the dollar price quoted by commercial banks saw another decrease of VND50/US$1 over last week. For the first time since the State Bank raised the daily trading band to +/-2%, the exchange rate offered by commercial banks was lower than the inter-bank official exchange rate.

 

On August 11, the interbank exchange rate was VND16,490/US$1, which meant that banks could quote the exchange rates of between VND16,160/US$1 and VND16,820/US$1. Meanwhile, the sale prices quoted by Vietcombank HCM City and Eximbank were VND16,480/US$1.

 

Earlier yesterday morning, Eximbank’s dollar sale price was VND16,430/US$1 only, while other banks purchased dollars in cash at VND16,300/US$1 only. As such, if comparing the dollar price with the highest peak reached on June 27, the dollar price had dropped by 2.23% by August 11, or VND376/US$1.

 

Governor of the State Bank of Vietnam Nguyen Van Giau said on the central bank’s official website that the trade gap in 2008 will not exceed $20bil, which has helped ease the worries about the dollar’s revaluation.

 

With the estimated trade deficit, Vietnam will have enough dollars to offset the excess of imports over exports. In fact, the demand for consumer products imports always increases towards the year’s end. However, consumer product imports just account for a small percentage of import structure. Experts say that there is no need to worry about the foreign currency supply as the supply will become profuse at the year’s end when overseas remittance, foreign direct investment disbursement and receipts from exports increase.


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