USD interest rate down to 0%: USD trading less stressful

The move by the State Bank of Vietnam (SBV) is considered by experts to be shifting the function of depositing money in USD to the function of buying and selling between banks and businesses and individuals. This is also the measure that SBV applied to gold before when removing gold from the investment, trading and storage channels.

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Immediately after the State Bank announced to reduce the interest rate on USD deposits of organizations and individuals to 0% from December 18, foreign currency trading activities at commercial banks continued as usual. The trading margin between buying and selling USD in the market at some banks has decreased. The exchange rate on the morning of December 18 was still anchored at the ceiling of 22,574 VND/USD as in the previous session. The market was less tense because banks expected that there would be additional USD to the market.

According to records at some bank branches on Hoang Quoc Viet Street (Cau Giay, Hanoi), there was no rush to sell USD. Even on the afternoon of December 18, when the State Bank's decision to adjust interest rates took effect, USD buying and selling transactions at some major bank branches on this street were still as usual.

A transaction officer at Vietcombank branch on Hoang Quoc Viet street said: "Right after the State Bank announced the interest rate adjustment, some customers came to sell USD, but this number is not much."

She said that the 0% interest rate on USD deposits has caused many people with USD accounts to want to convert to Vietnamese Dong because the current interest rate on VND is 5-7% higher per year.

However, in the black market, the phenomenon of “price fixing” and “inflating” the USD is quite complicated and has not decreased compared to before. The USD buying and selling prices in the black market are higher than the listed prices of commercial banks and the ceiling price of the State Bank by 400 – 600 VND/USD.

On Ha Trung and Tran Nhan Tong streets (Hanoi), the buying and selling prices of USD are 300-600 VND/USD higher than the listed prices of banks. The buying price is around 22,700 VND-22,800 VND/USD, higher than the listed price of banks at more than 22,500 VND/USD. The selling price is at 22,899 VND to 23,200 VND/USD.

Commenting on the policy of lowering interest rates to curb the black market's USD price inflation, expert Ngo Tri Long said that the State Bank's lowering of interest rates to 0% is a multi-target arrow. In the long term, it will limit the hoarding, holding and accumulation of dollars, while in the short term, this measure will help the USD foreign exchange market to be less tense because it is expected that people will sell dollars to open Vietnamese currency accounts, reducing pressure on the exchange rate and widening the trading band at banks. At the same time, this policy also helps the supply of dollars in the black market to be less tense, limiting the shop owners from inflating prices and making the USD price.

According to Finance - Banking expert Nguyen Tri Hieu: "Holding USD at this time is not beneficial because this is the end of the year, the demand for foreign currency of banks is large, so depositors can sell to banks to be more profitable. Besides, switching to savings in Vietnamese Dong with an interest rate of 5 - 7%/year is completely more feasible than owning USD lying idle".

According to people