Vietnam central bank net injects biggest amount of cash in 17 months

The Vietnamese central bank net pumped VND42,666 billion ($167.5 million) in cash into the local banking system on Thursday, the largest daily volume since mid-October 2022.

During the day, the State Bank of Vietnam (SBV) provided VND43,064 billion ($1.69 billion) in financing to eight commercial banks via open market operations (OMOs) at an interest rate of 4.5% per annum, with a 14-day maturity.

The same day, the banking regulator withdrew VND750 billion ($29.44 million) by issuing 24-day T-bills at an interest rate of 4.2% per annum, the highest since March 2023.

Meanwhile, VND48 billion ($1.88 million) in repos and VND400 billion ($15.7 million) in T-bills matured. These operations resulted in a net injection of VND42,666 billion ($1.67 billion) on Thursday, the highest since October 17, 2022, SBV data showed.

As of May 23, the SBV had net withdrawn an outstanding VND26,128 billion ($1.026 billion) from the system, versus a net injection position of VND22,000 billion late last month.

According to SBV data, the average interest rate of the overnight loans, which account for nearly 90% of the total transaction value, jumped to 4.55% per annum on Wednesday (May 22) from 4.08% a day earlier. The climb followed the SBV increasing the OMO rate the same day.

The simultaneous increase of both OMO and T-bill interest rates on Wednesday amid commercial banks consistently selling the U.S. dollar at the upper limit was aimed to lift the interbank rates to a new level, thus helping reduce the USD-VND interest rate spread and eventually easing the upward pressure on the USD/VND forex rate, local economists said.

The SBV lowered its central reference USD/VND rate by VND4 to VND24,254 a dollar on Friday. State-owned Vietcombank raised its quote by VND7 from Thursday to VND25,247-25,477 a dollar for buy and sell, respectively.