A trade surplus of US$56 million in the first quarter has heightened supply of the greenback while interest rates are expected to remain the same until late April following similar moves in the US Federal Reserve key rate rise.
The modest Vietnam dong depreciation against the US dollar has so far contributed to stabilizing US dollar demand, most of it from importers.
In recent years, that the country has generally recorded a monthly trade deficit, partly attributed to Vietnam’s heavy reliance on oil product imports due to a shortage of major refineries in the country.
Vietnam’s exports in the first three months rose by 20.3 per cent against last year to $8.57 billion and import spending was up 1.9 per cent to $8.51 billion, according to the Trade Ministry.
Thus, this is an optimistic signal for Vietnam, hoping to easing its trade deficit within the next five years.
However the trade surplus accounts for a small portion of only 0.7 per cent of export revenue.
The central bank targeted that Vietnam dong would be down only 0.32 per cent against the greenback in the first quarter compared to a fall of nearly 1 per cent in the whole of 2005.
On Monday, the State Bank of Vietnam (SBV) fixed the VND/USD forex rate at VND15,922 per US dollar, compared to VND15,872 on January 3.
Additionally, the SBV maintained the base rate for Vietnam dong loans at 8.25 per cent applicable for April, unchanged since December 2005.
According to bankers, interest rates should stand firm until late April after the US Federal Reserve raised its key rate by a quarter point to 4.75 per cent on March 28.
Interest rate rises began in Vietnam at the start of this year when Ho Chi Minh City based banks increased yields on deposits in the first quarter.
The SBV’s Ho Chi Minh City arm said compared to the end of 2005, rates prevailingly rose by 0.36-0.96 per cent a year to 8.4-9.6 per cent for dong deposits and 4.1-4.6 per cent a year for USD deposits.
Total deposits in local commercial banks booked VND201.7 trillion, up by 6.78 per cent compared to the beginning of this year while loans are now some VND178 trillion, edging up by 1.2 per cent.
Bankers said the lunar New Year festival in February witnessed slow lending because Vietnamese people traditionally avoid going into debt at the start of the new year.
Four state-run commercial banks, Vietnam's key lenders, offered overnight Vietnam dong loans at 5.9-6 per cent on Monday, against 6 per cent a week ago.
Vietnam Economic Times, Youth
Vietnamese
