Vietnam banks expect increase in dollar supply

Commercial banks have said that with the gap between official and black-market exchange rates narrowing, they would find it easier to buy dollars.

The dong weakened to 19,100 against the dollar at local banks after the State Bank of Vietnam lowered the daily reference rate 3.3 percent to 18,544 last week, the second devaluation since November to control the trade deficit and stabilize the economy.

 

As unofficial rates were much higher than those at commercial banks, many people favored trading in the black market. Now that the gap has been narrowed, bankers said they expected easier dollar purchases after Tet holidays.

 

A new rate cap on dollar deposits would also curb dollar speculation and increase the supply of the currency in the market, according to banks.

 

The central bank last week introduced a cap on interest rates for corporate dollar deposits of 1 percent.

 

Following the move many banks cut their rates down to 1 percent from 2.5-4.5 percent earlier. According to banks, interest rates on dong deposits are now more attractive and would encourage companies to shift their dollar savings.

 

VietNamNet/SGGP

 

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