SBV boosts money supply via OMO
HCMC - The central State Bank of Vietnam (SBV) has been pumping money into the system through open market operations (OMO) and credit institutions have absorbed a fairly large volume compared with the past few weeks in preparation for higher demand for the dong during the final days of the lunar year.
A total of VND21.15 trillion, with a 28-day term and an interest rate of 5% per year, was injected via OMO last Friday. The winning volume was 2-4 times higher than normal.
For example, credit institutions absorbed only VND8.27 trillion last Monday and nearly VND7 trillion last Wednesday via OMO, whereas the bill channel failed to lure buyers and already fell due last weekend.
“Bank liquidity is getting tighter as the Lunar New Year is drawing near. And the State Bank of Vietnam (SBV) is pumping money into the banking system through OMO,” a money dealer at a bank told the Daily.
That is the reason why the interbank interest rate went up on the morning of January 16, exceeding the level of 5% for all transactions from overnight to two weeks. However, market liquidity remained stable as an advantage for the whole year.
The change in the financing cost has affected the bond market, making the primary government market quieter, with a lower ratio of successful bids.
The U.S. dollar interest rate on the interbank market has slightly increased following a fall in the previous two weekends, standing at 1.15% for overnight, 1.32% for one week, 1.52% for two week, 1.55% for one month and 1.98% for three months.
Interbank foreign exchange transactions have taken place in a fairly quiet atmosphere in recent sessions. The interbank market has not overcome the inertia generated by the SBV’s hike of the greenback buying price to VND22,575.
Information on foreign currency inflows continues to help stabilize the exchange rate. On January 16, the central reference rate was put at VND22,161 per U.S. dollar, unchanged from last weekend, with the floor and ceiling at VND21,496 and VND22,826 respectively.
Banks predict the exchange rate will remain stable at VND22,570-22,575 this week, with the rate on the free market to go down to VND22,720-22,760.
Banks believe the abundant remittances along with overseas Vietnamese returning home for Tet in droves is the reason why the free market is more awash with foreign currency and the exchange rate may be reduced between now and the holiday.
Another reason comes from U.S. politics. International financial circles have not overcome the frustration over the so-called “disappointing news conference” of the U.S. president-elect.
The market has reacted negatively as investors feel uncertain about Donald Trump’s economic policies. Besides, Fed Chair Janet Yellen in a speech focused on the U.S. labor market without mentioning forecasts for near future.
As always, when the greenback goes down, gold will mark up. The world gold price has been surging sharply in recent trading sessions, picking up 0.65 percentage point early on January 16 Asian time, to US$1,203.36 an ounce.
Under the pressure from the rise in global markets, domestic gold price inched up VND100,000 per tael for both buying and selling. Currently, the price quoted by SJC is VND36.47 million a tael for buying and VND36.77 million for selling.
The domestic gold price is now VND3.7 million per tael higher than the world’s. A tael equals 1.2 troy ounces.