State Bank of Vietnam to buy US dollars at VND25,500 to boost dong supply

Under the plan, the SBV will purchase dollars on Mondays and Wednesdays each week, with transactions scheduled for the next working day if they fall on a public holiday.

Eligible sellers are credit institutions and foreign bank branches with positive foreign currency positions.

The maximum amount each institution can sell will be limited to the amount needed to bring its foreign currency position back to balance, based on its position at the end of the working day preceding the transaction.

The SBV has yet to announce an overall purchase limit for each session.

Experts estimate that every US$1 billion purchased would inject approximately VND25.5 trillion into the banking system.

Dollar purchases to support year-end liquidity

Nguyen Quang Huy, CEO of the Faculty of Banking and Finance at Hanoi-based Nguyen Trai University, told Tuoi Tre (Youth) online newspaper that the spot dollar purchases would help increase the supply of Vietnamese dong, enabling banks to meet rising payment demand toward the end of the year.

The purchases could also help boost the country's foreign exchange reserves when foreign currency supply and demand conditions are favorable.

If short-term funding pressures ease, interbank lending rates could become more stable, he said.

However, the actual amount of dong injected into the banking system will depend on the volume of dollars purchased and other operations to supply or withdraw dong liquidity during the same period.

At the government's regular October press briefing, SBV Deputy Governor Pham Thanh Ha said demand for capital to support economic growth remained high, while complicated global economic developments were putting pressure on domestic interest rates.

To support liquidity, the SBV has been conducting daily open market operations, providing refinancing and carrying out short-term foreign currency-to-dong swaps.

On November 3, it also announced a six-month foreign currency-to-dong swap program to provide credit institutions with funding over a longer period.

Ha said these measures would help lower the overall interest rate level and support the country's economic growth target.

Banks urged to cut deposit and lending rates

Ha said the SBV continued to urge credit institutions in October to mobilize resources, cut operating costs and share profits with customers by lowering interest rates.

Specifically, banks were asked to reduce deposit rates by 0.5-1 percentage point per year on new deposits with terms of at least six months, creating room for lending rates to fall.

For loans supporting production, business activities and priority sectors, the required reduction was 1.5-2 percentage points per year.

By early November, listed deposit rates had fallen by around 0.5 percentage point per year at state-owned commercial banks and foreign banks, and by 0.5-0.7 percentage point at joint-stock commercial banks.

In late October, average deposit rates on new accounts had declined by approximately 0.4 percentage point per year compared with mid-month, while lending rates on new loans had fallen by 0.2-0.5 percentage point over the same period.

More than 20 banks also announced preferential credit programs for production, business activities and priority sectors, offering interest rate reductions of 1.5-2 percentage points per year.

Ha said the SBV would continue to proactively manage liquidity and supply capital to the market to help lower interest rates.

Credit institutions were also asked to further reduce costs, apply technology and simplify procedures to make it easier for individuals and businesses to access loans.

The SBV will closely monitor credit growth during the final two months of the year, direct capital toward production, business activities and priority sectors, and manage the exchange rate flexibly in line with market developments and foreign currency supply and demand.

According to Tuoi Tre, the central reference rate stood at VND25,600 per dollar on Tuesday, down VND10 from the previous trading session.

At 3:00 pm that day, Vietcombank quoted its dollar buying rates at VND25,350 in cash and VND25,380 for transfers, while its selling rate was around VND25,760.

BIDV listed its buying rate at VND25,385 and selling rate at VND25,765 per dollar.