Vietnam central bank slows down cash withdrawal as exchange rate remains stable

The State Bank of Vietnam (SBV), the country’s central bank, has reduced the volume of T-bills put up for auction as the USD/VND exchange rate stays stable.

The SBV raised another VND3.7 trillion ($147.84 million) from auctioning 28-day T-bills on Tuesday, with a winning rate of 1.9% per annum, higher than the 1.35-1.4% recorded in the previous sessions.

Tuesday’s volume was equal to one-fourth of the previous week’s average at VND12,967 billion ($520.6 million) per auction. It was VND10,300 billion during the withdrawal streak of September-November 2023.

Since resuming T-bill sales on March 11 after a four-month hiatus, the SBV has withdrawn a total of VND156 trillion ($6.3 billion), but is yet to pump back cash into the system. The first batch of T-bills will mature on April 8.

BIDV Securities (BSC) estimated last week that the regulator would net withdraw VND100-150 trillion ($6.35 billion) in the ongoing T-bill sales streak.

The SBV usually issues T-bills when it reckons that liquidity is in excess amidst negative credit growth, causing the Vietnamese dong to devalue against the U.S. dollar.

Meanwhile, interbank interest rates on VND-denominated loans remain low. The overnight rate was 0.13% per annum on March 22, similar to late 2023 and early 2024 when liquidity was ample, according to SBV data.

After surging in the aftermath of the Lunar New Year holiday, the USD/VND rate has stabilized these days thanks to the SBV squeezing excessive liquidity.

The U.S. Dollar Index (DXY), which measures the strength of the greenback against a basket of currencies, is trading around 104 after the Fed decided last week to put its benchmark rates unchanged.

State-owned Vietcombank, reportedly the largest forex trader in the country, quoted the U.S. dollar at VND24,580-24,950 for bids and asks on Wednesday, up VND20 from Tuesday. Other major banks offered the greenback at similar rates.

The SBV raised its mid-point USD/VND rate by VND4 from Tuesday to VND23,998 on Wednesday.

Meanwhile, USD prices on the black market fell VND50 and VND20 to VND25,450-25,580 for buying and selling, respectively.