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Vietnam money: rates up as banks need more funds
http://www.thanhniennews.com/images/...ang-170-06.jpg Interest rates on short-term Vietnamese dong loans rose in the past week as banks sought to raise more dong funds to meet loan demand, bankers said on Monday. Dollar rates are also rising, reflecting competition in the market to secure the currency.
Banks began raising rates on overnight dong loans immediately after the central bank hiked mandatory reserves on June 1 as part of efforts to contain inflation, bankers said.
"Banks are trying to raise more dong to bridge the shortfall caused by the hike in compulsory reserves by the central bank," a banker in Hanoi said.
Four state-run banks raised rates on overnight dong loans to between 6.5 percent and 7 percent, nearly double the rates seen in the second half of May of between 3.5 and 4 percent and up from 4 percent to 4.5 percent last Monday .
Rates on six-month dong loans rose to 8.6 percent from a range of 7.5-8.0 percent last week.
The central bank doubled reserve requirements on dong deposits with terms of up to 12 months to 10 percent as of June 1.
It doubled the reserve requirement on dong deposits of 12 months to 24 months to 4 percent and raised the reserve ratio for foreign currency deposits with terms of less than 12 months to 10 percent from 8 percent.
On Monday, the head of the central bank's foreign exchange department, Phi Dang Minh, was quoted by state media as saying the additional funds would be used to purchase U.S. dollars on the market to weaken the dong.
The central bank has said it no longer has a fixed target for the value of the dong for the end of 2007, but it would ensure the dong's value is on par with other currencies.
On Monday, the central bank set the dollar exchange rate at VND16,110, nine dong weaker than VND16,101 at the end of 2006.
In the dollar market, Bank for Agriculture and Rural Development, Vietnam's top lender, plans to raise $30 million from seven-month and 364-day bills, acting Chief Executive Nguyen The Binh said in a statement.
The Hanoi-based unlisted bank will pay an annualized rate of 4.7 percent on the seven-month bills. It will pay 5.2 percent on the 364-day bills, above 5 percent the bank pays for 12-month dollar deposits.
State-run Bank for Foreign Trade, or Vietcombank, the third-largest bank by assets, said it had raised its 12-month dollar savings rates to 5 percent in Ho Chi Minh City from 4.85 percent earlier.
Source: Reuters