Vietnam central bank cuts OMO interest rate to 4% per year

By Dinh Vu, Minh Hue
Tue, September 17, 2024 | 6:07 pm GMT+7

Vietnam's central bank on Monday lowered its interest rate on open market operations (OMO) to 4% per annum from 4.25% that had been in place since early August.

The move came amid expectations that the U.S. Federal Reserve (Fed) will lower interest rates sooner than anticipated.

Earlier, on August 5, the central bank, or the State Bank of Vietnam (SBV), had cut the rate from 4.5% per annum to 4.25%.

The State Bank of Vietnam reduces the interest rate on open market operations (OMO) to 4% per annum. Photo courtesy of Stockbiz.

The State Bank of Vietnam reduces the interest rate on open market operations (OMO) to 4% per annum. Photo courtesy of Stockbiz.

This cut reversed the trend of increasing the rates earlier in the year, when the SBV had raised the OMO rate twice, in mid-April and May 2024, from 4% to 4.25% and then from 4.25% to 4.5%. However, the amount of OMO allocated in the latest auction was relatively low, totaling just over VND536 billion ($21.76 million).

The SBV's move is considered appropriate given the continuous declines of the USD/VND exchange rate in recent weeks due to increased foreign reserves and expectations that the Fed will lower interest rates in the near future.

On the interbank market, the USD/VND exchange rate fell to VND24,543 on September 13, down VND47 from a week earlier. Since the end of July, the exchange rate has dropped by approximately 2.8%.

The USD/VND exchange rate quoted by domestic banks also declined significantly. By September 13, the selling rate at banks was around VND24,730-24,750 per USD, while the buying rate was between VND24,360-24,400 per USD.

Since early August, the USD price at banks has decreased by about VND700, or 2.7%, narrowing the depreciation of the VND against the USD from 4.3% in June and July to 1.3%.

In the informal market, the USD price dropped to below VND25,000 per USD on both buying and selling sides. Compared to the peak of nearly VND26,000 recorded at the end of June, the USD price has fallen by nearly VND1,000, or 3.8%.

Alongside the OMO rate cut, interest rates on the interbank market have also decreased significantly across most terms.

Specifically, the overnight (ON) rate dropped by 1.15 percentage points to 3.44%, reflecting the ample liquidity in the banking system, particularly as the SBV continues to implement measures to net withdraw money from the market.

According to the SBV, from September 9 to 13, 2024, the central bank withdrew VND37.57 trillion ($1.53 billion) through reverse repos. This indicates its efforts to balance between liquidity injection to support the economy and controlling inflation, avoiding excessive monetary expansion that could lead to future inflationary pressures.

Economists believe that the continued reduction in the OMO rate is part of a flexible monetary policy aimed at responding to global economic fluctuations and maintaining domestic economic stability.

In the future, if macroeconomic factors such as inflation, exchange rates, and credit growth are well managed, interest rates in the market may continue to trend downward, facilitating economic recovery and growth.

Comments (0)
  • Read More
An insight into Vietnam's Investment Support Fund decree

An insight into Vietnam's Investment Support Fund decree

On December 31, 2024, the Vietnamese Government issued Decree No. 182/2024/ND-CP on establishment, management and usage of the Investment Support Fund - a move in response to the impact of the Global Minimum Tax (GMT). This strategic initiative underscores its commitment to fostering innovation and establishing Vietnam as a hub for cutting-edge technology, write Deloitte Vietnam analysts.

Consulting - Mon, January 6, 2025 | 8:23 am GMT+7

Vietnam beats Thailand to win ASEAN Cup

Vietnam beats Thailand to win ASEAN Cup

Defeating Thailand 3-2 in the second leg of the final on Sunday evening, the Vietnamese team won the ASEAN Cup 2024 with a final score of 5-3.

Society - Sun, January 5, 2025 | 10:47 pm GMT+7

Thailand urges five industries to adapt to new challenges

Thailand urges five industries to adapt to new challenges

The Thai Ministry of Industry has asked manufacturers in five industries, including automobile manufacturing, electronics, electrical appliances, steel and garment, to take more serious efforts to adapt to projected US trade policies, the influx of low-cost imports into the Thai market, and disruptive technology.

Southeast Asia - Sun, January 5, 2025 | 9:07 pm GMT+7

Southeast Asian economies face ‘hard challenges’ in 2025

Southeast Asian economies face ‘hard challenges’ in 2025

The year 2025 is set to be a challenging year for Southeast Asian countries that are looking to boost their economic growth as the world faces economic slowdown, geopolitical tensions, and trade fragmentation, particularly new tariffs by the U.S.

Southeast Asia - Sun, January 5, 2025 | 9:00 pm GMT+7

Malaysia's renewable energy sector sees bright prospects

Malaysia's renewable energy sector sees bright prospects

Malaysia's renewable energy sector is expected to witness robust growth, driven by government initiatives and forthcoming investments, according to financial services company Philip Capital.

Southeast Asia - Sun, January 5, 2025 | 8:21 pm GMT+7

Singapore to build most efficient hydrogen-compatible natural gas power plant

Singapore to build most efficient hydrogen-compatible natural gas power plant

The Energy Market Authority (EMA) of Singapore on Friday announced the awarding of a contract to electricity generator PacificLight Power to build a hydrogen-compatible natural gas power plant on Jurong island.

Southeast Asia - Sun, January 5, 2025 | 8:17 pm GMT+7

2024 marks hottest year in Indonesia’s history

2024 marks hottest year in Indonesia’s history

Last year was recorded as the hottest year in Indonesia's history, the country's Agency for Meteorology, Climatology, and Geophysics (BMKG) reported on Friday.

Southeast Asia - Sun, January 5, 2025 | 8:16 pm GMT+7

TMT Motors stock hits ceiling for 7 consecutive sessions on deals signed with foreign partners

TMT Motors stock hits ceiling for 7 consecutive sessions on deals signed with foreign partners

TMT Motors Corporation (TMT), a major player in the Vietnamese automotive sector, saw its ticker hit its ceiling price for the seventh consecutive session to VND11,200 ($0.44) per share last Friday, after the firm reached deals with foreign partners.

Companies - Sun, January 5, 2025 | 3:36 pm GMT+7

Jinko Solar Vietnam 'dumps' prices by 72% for solar cells exported to US

Jinko Solar Vietnam 'dumps' prices by 72% for solar cells exported to US

Jinko Solar (Vietnam) Industries, under China’s major solar module manufacturer Jinko Solar, exported its crystalline silicon photovoltaic cells (solar cells) into the United States with "a dumping margin of 71.85%".

Companies - Sun, January 5, 2025 | 2:58 pm GMT+7

Vietnamese stocks soar on partnerships with billionaire Pham Nhat Vuong

Vietnamese stocks soar on partnerships with billionaire Pham Nhat Vuong

The price of many stocks in Vietnam have surged following news of strategic partnerships with electric vehicle maker VinFast, Green and Smart Mobility JSC (GSM), and other companies owned by billionaire Pham Nhat Vuong.

Finance - Sun, January 5, 2025 | 9:51 am GMT+7

Vietnam private lender ABBank appoints new general director

Vietnam private lender ABBank appoints new general director

Hanoi-headquartered ABBank has appointed Pham Duy Hieu as its general director, starting from January 1, 2025.

Banking - Sun, January 5, 2025 | 9:00 am GMT+7

HCMC prioritizes infrastructure, innovation hubs, data centers under new master plan

HCMC prioritizes infrastructure, innovation hubs, data centers under new master plan

Ho Chi Minh City seeks to mobilize over VND4.4 trillion ($173 million) between 2026 and 2030 to implement key infrastructure projects such as ring roads, expressways, bridges, and seaports according to its newly approved master plan, said the city mayor.

Top News - Sun, January 5, 2025 | 8:00 am GMT+7

Vietnam has sufficient conditions to develop modern financial market: Prime Minister

Vietnam has sufficient conditions to develop modern financial market: Prime Minister

Vietnam possesses all the necessary conditions to develop a modern financial market, including the establishment of international and regional financial centers, Prime Minister Pham Minh Chinh said on Saturday.

Finance - Sat, January 4, 2025 | 3:17 pm GMT+7

Vietnam's industrial hub Binh Duong province okays 23 projects

Vietnam's industrial hub Binh Duong province okays 23 projects

Binh Duong province, a manufacturing hub in southern Vietnam, on Thursday granted investment registration certificates and in-principle approvals to 23 projects, with total registered capital exceeding $1.7 billion.

Investing - Sat, January 4, 2025 | 2:15 pm GMT+7

Herbalife Vietnam fined $8,000 for violating multi-level marketing rules

Herbalife Vietnam fined $8,000 for violating multi-level marketing rules

The National Competition Commission has fined Herbalife Vietnam, a U.S-invested dietary supplement company, VND205 million (over $8,000) for its violations in multi-level marketing.

Companies - Sat, January 4, 2025 | 12:35 pm GMT+7

Vietnam to abolish VAT waiver for low-value imports amid e-commerce boom

Vietnam to abolish VAT waiver for low-value imports amid e-commerce boom

Vietnam will scrap an existing regulation that exempts low-value imported goods from value-added tax (VAT) and import taxes starting February 18.

Economy - Sat, January 4, 2025 | 11:09 am GMT+7