The Central Bank’s Massive 5-Trillion VND Injection: Stabilizing the Market with Force

In specific terms, the SBV lent commercial banks a total of nearly 35.62 trillion VND at a 4% interest rate through the OMO channel. With a maturity amount of over 33.5 trillion VND last week on this channel, the SBV’s net injection amounted to 2.09 trillion VND.

Turning to the bill channel, the SBV issued 2 trillion VND worth of bills last week. Given that nearly 5 trillion VND in bills matured during the same period, the net injection through this channel stood at approximately 3 trillion VND.

Wigroup, a financial data provider, reported a decrease in bill interest rates to 3.1% last week from 3.2% the week before. Over the past two weeks, bill interest rates have witnessed a cumulative decline of 1.9 percentage points, dropping from 4.0% to 3.1% per annum.

Headquarters of the State Bank of Vietnam

Within the interbank market, overnight interest rates followed a downward trend last week, except for the session on March 4. Specifically, on March 3, overnight interbank interest rates climbed to 4.74% per annum, only to dip to 3.98% a few days later on March 6. This decrease is significant when compared to the peak of 6.09% recorded back in November 2024.

Currently, interbank interest rates for terms ranging from one week to three months fluctuate between 4.02% and 5.02% per annum.

Deposit interest rates at commercial banks have also witnessed a reduction of 0.1-0.9 percentage points across various terms over the last two weeks, with some key terms now falling below the 6% mark.

According to data from the New York branch of the US Federal Reserve (Fed), the spread between the US secured overnight financing rate (SOFR) and Vietnam’s overnight interest rate on March 6 was 0.37%. This wide gap between USD and VND interest rates is exerting additional pressure on the USD/VND exchange rate.

In a recently released currency market report, MB Securities Company (MBS) attributed the strong fluctuations in the USD/VND exchange rate last month to the high level of the US dollar index (DXY) globally, coupled with increased domestic demand for dollars due to rising imports of production materials and substantial dollar purchases by the State Treasury.

Looking ahead, MBS analysts predict that during the first quarter of 2025, the USD/VND exchange rate will oscillate between 25,500 and 25,800 VND per dollar. This forecast takes into account the anticipated strengthening of the DXY in 2025 due to escalating trade tensions.

However, there are still positive factors bolstering the dong, including a favorable trade surplus of approximately 1.47 billion USD, robust FDI disbursement totaling 2.95 billion USD, and a notable recovery in the tourism industry.