Bank believes cuts to USD deposit rates part of anti-dollarization efforts but expects further action in monetary policy next year.
Commenting on the latest move by the State Bank of Vietnam (SBV) to adjust the USD deposit rate, ANZ said that while it is important to note the move is a technically part of an anti-dollarization policy it nonetheless expects further monetary policy easing in 2016 given the regional slowdown led by China.
In a report, ANZ noted the SBV cutting the maximum deposit rate on USD accounts held by institutions by 0.25 per cent per annum to 0 per cent to annum and the maximum rate on deposits by individuals being cut to 0.25 per cent per annum from 0.75 per cent. The last time the central bank adjusted USD deposit rates was in March 2014. The cap on VND deposits was also maintained at 5.5 per cent. The moves are in clear pursuit of the central bank’s anti-dollarization policy. The official SBV statement referenced an intention to prevent the hoarding of foreign currency, which is a de-facto reference to the dollar.
The USD/VND rate has remained close to the upper band of the SBV’s trading range (VND21,233 - VND22,547) since the VND devaluation and band widening in August. It is now trading around VND22,490 against the greenback. Despite softening around 5 per cent year-to-date, the VND remains one of the more resilient currencies in the region supported by sustained export growth amid contracting exports among Vietnam’s regional peers.