The dollar price has been rising over the last week. Commercial banks announced the exchange rate at VND16,112/US$1, while the inter-bank rate announced by the central bank was VND16,113/US$1.

US$ value up, US deposit interest rates up

The greenback has also seen a price increase in the black market. Currency exchange agents on Dinh Tien Hoang and Ha Trung streets in Hanoi quoted the purchasing price at VND16,100/US$1 and selling price at VND16,130/US$1.

The agents said that the price of the dollar had increased because banks and gold trading firms were trying to buy more dollars to import gold (the gold price in the world market is softer than that of the previous week). Moreover, the demand for dollars is increasing because enterprises are now making import deals.

Due to the dollar price increases, commercial banks are rushing to offer attractive interest rates for US$ deposits. VIB Bank, for example, began issuing $30mil worth of short-term deposit certificates in mid May at high interest rates. The offered interest rates are 4.9%, 5.2% and 5.3% for four-month, seven-month and 11-month term deposits, respectively.

Habubank began adjusting its US$ deposit interest rates in early June 2007, raising the average rate by 0.05%-0.5%. The rate applied for demand deposits is 1.5% per annum, while the rates for three-month, six-month and nine-month term deposits are 4.75%, 4.9% and 5%, respectively.

Habubank’s representative said that the bank decided to raise the deposit interest rates in an effort to raise more funds in US$ from the public to meet the increased demand for dollars.

Making deposits in VND or US$?

When asked if VND deposit interest rates would increase to follow the US$ deposit interest rate increases, Han Ngoc Vu, Director General of VIB Bank, said that in the short term, VND deposits might see some adjustment; however, in the long term, VND deposit interest rates would stay firm or go down slightly.

It is very difficult to give an answer to the question of which currency, the VND or the dollar, to make deposits in.

In the long term, depositors can avoid risks when the VND devaluates if they make deposits in US$. However, the dollar is devaluating against other hard currencies in the world. Experts have also said that as the foreign investment flow into Vietnam increases, including portfolio investment, the US$/VND exchange rate will go down.

Analysts have predicted that commercial banks will have to offer higher deposit interest rates as the State Bank of Vietnam has decided to require a higher rate of compulsory reserve. Therefore, depositors will make more profit if they make deposits in VND.

(Người Lao động)

Source: vneconomy