Vietnam central bank withdraws $609 mln in cash after 4-month hiatus amid weakening VND

By Anh Minh
Tue, March 12, 2024 | 9:55 am GMT+7

The State Bank of Vietnam (SBV), the country’s central bank, on Monday withdrew VND15 trillion ($608.6) million in cash from circulation via a T-bill auction after a four-month hiatus as the local currency has devalued rapidly since the start of the year.

Bank notes are counted at a bank branch in Hanoi. Photo by The Investor/Trong Hieu.

Bank notes are counted at a bank branch in Hanoi. Photo by The Investor/Trong Hieu.

Six banks won bids to buy the 28-day T-bills at an interest rate of 1.4% per annum, SBV data showed.

The current context is similar to that in September last year when the USD/VND exchange rate was under great upward pressure amid ample liquidity and lukewarm credit growth.

Interbank interest rates of the Vietnamese dong (VND) have dropped sharply after the Lunar New Year peak. The rate of overnight loans, which usually account for 90% of total transactions, stood at 1.17% per annum on March 7, down nearly three percentage points from its peak in mid-February.

Meanwhile, lending fell 1% in the year to February 16, further declining versus a 0.6% contraction as of end-January.

The USD/VND rate at commercial banks has increased circa 1.4% so far this year and is approaching the historic high set in late 2022.

The resumption of T-bill sales is aimed at reducing liquidity in the tier-2 (interbank) market to dampen VND devaluation speculation. The moderate volume on Monday indicated that the SBV was cautious about causing liquidity constraint in the tier-2 market.

The SBV resumed 28-day T-bill auctions on September 21, 2023 after a six-month suspension. The regulator withdrew a combined VND364.35 trillion ($14.62 billion) over 34 consecutive days.

The SBV reduced its mid-point USD/VND rate on Tuesday by VND17 from Monday to VND23,955.

USD prices in the unofficial market eased on Tuesday morning. Gold shops quoted the rate at VND25,480-25,600 a dollar for bids and asks, down VND20-100 from Monday, respectively. Meanwhile, the prices were mixed at commercial banks, with Vietcombank fixing the rate at VND24,430-24,800, up VND10 from Monday.

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