Central bank takes looser monetary measures

A bank teller counts the dollar at a transaction office in Hanoi. The rapid cooling of the exchange rate creates conditions for the SBV to implement a looser monetary policy, in order to support liquidity for the banking system and the economy. (Photo: baodautu.vn)

Hanoi - The State Bank of Vietnam (SBV) has relaxed monetary measures in the context of sharp declines in the foreign exchange rate in recent days.

Specifically, the SBV has stopped offering treasury bills since this week. This was the first time in many months that the SBV has not issued new bills.

The SBV this week also continued to reduce the bill interest rate from 4.2 per cent per year to 4.15 per cent per year. This was the third time this month that the SBV reduced the interest rate on bills. Previously, on August 5, the SBV cut the rate from 4.5 per cent per year to 4.25 per cent per year. The rate was then further reduced to 4.2 per cent on August 20.

The SBV still maintains a liquidity support through open market operation (OMO) channel with more than 5.98 trillion VND at a term of 14 days and an interest rate of 4.25 per cent. Compared to previous trading sessions, the OMO term doubled, while the interest rate remained unchanged.

Previously, the SBV also reduced the OMO interest rate from 4.5 per cent to 4.25 per cent in the session of August 5.

After continuously maintaining a net withdrawal of liquidity since the beginning of June 2024, the SBV this week injected a net amount of more than 9.1 trillion VND into the banking system.

The SBV’s move to gradually reduce interest rates and stopping treasury bill issuance early this week shows the SBV's orientation to support the liquidity of the banking system, in order to contribute to establishing a lower interbank interest rate level shortly.

At the same time, increasing the OMO loan term while keeping the interest rate unchanged also shows the SBV's initiative in reducing the interbank interest rate level.

The SBV has continuously implemented monetary loosing measures in the context of sharp declines in the exchange rate in recent days.

On the interbank market, the USD/VND exchange rate fell below 25,000 VND last week and continued to fall in this week. Since the beginning of August, the rate has decreased by 1.4 per cent.

The USD exchange rate listed at commercial banks has also continuously decreased in recent weeks, to the range of 25,000 VND for selling and 24,700 VND for buying. Since the beginning of August, the dollar price at banks has decreased by nearly 400 VND, equivalent to about 1.5 per cent.

The exchange rate on the unofficial market has also continuously declined sharply and is currently trading at 25,200 VND - 25,300 VND per dollar.

The rate on the unofficial market has started to fall sharply in the past month, especially in the first half of August. Compared to the peak of nearly 26,000 VND set at the end of June, the dollar price on the unofficial market is currently 700 VND lower, equivalent to a decrease of about 2.7 per cent.

According to analysts, the rapid cooling of the exchange rate creates conditions for the SBV to implement a looser monetary policy, in order to support liquidity for the banking system and the economy.

"In the context of positive macroeconomic signs, along with the SBV’s direction, liquidity is expected to be more stable and abundant, which can help interbank interest rates decrease again," analysts of the Vietcombank Securities Company (VCBS) commented in a recent macroeconomic report.

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