In the first quarter of this year, the U.S. dollar strengthened by about 2.3% against the Vietnamese dong, the strongest increase since 2012. The State Bank of Vietnam (SBV), the central bank, has recently issued a draft amendment to Circular 02/2021/TT-NHNN providing guidance for credit institutions that conduct foreign exchange transactions (Circular 02/2021). What is the SBV’s intention at a time when the foreign exchange market volatility remains? In a delicate situation As of March 25, 2024, capital mobilization by credit institutions had dropped by 0.76% against the end of 2023, while credit growth reached 0.26%. This is the lowest credit growth rate since 2013 and is far from the SBV’s target of 15% for 2024 set at the beginning of the year. Lower-than-expected credit growth and excess liquidity in the system have kept both market 1 and market 2 interest rates low. In market 1, where banking activities between credit organizations and clients (individual and corporate) take place, rates for short-term deposits below six months averaged 3.2-3.8% per year, while rates for terms over six months to one year were 4.8-5.8% per year. Meanwhile, in market 2, or the interbank market, rates for overnight, one-week, and two-week terms were […]
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