Exchange rates continue to cool down, interbank interest rates drop sharply

11/21/2023 14:57 Nhat Linh Print article

ANTD.VN - The cooling exchange rate allows for a more "relaxed" monetary policy. The State Bank stops withdrawing money through the treasury bill channel, injecting large amounts of money into the market, causing interbank interest rates to cool down rapidly.

Today (November 21), the State Bank listed the central exchange rate at 23,915 VND/USD, down 39 VND compared to the previous session and also the second consecutive sharp decrease. Previously, in yesterday's trading session, the central exchange rate was also 18 VND.

At banks, Vietcombank is listing the exchange rate at 23,930 VND/USD (buy) and 24,270 VND/USD (sell), down 75 VND compared to yesterday. At other banks, the USD buying and selling prices have also dropped sharply.

Domestic exchange rate pressure has cooled down significantly thanks to the decline in the global USD amid market confidence that the Fed will stop raising its key interest rate.

The DXY index - measuring the USD's fluctuations against a basket of six major world currencies - fell to around 103.3 points - the lowest level in the past two months.

The dollar fell as weaker-than-expected US inflation and jobs data raised expectations that the Fed will pivot monetary policy sooner than expected.

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The exchange rate decrease further pushes the interest rate level down.

The cooling exchange rate allows domestic monetary policy to be more “relaxed”. Since November 9, the State Bank has stopped issuing treasury bills and pumped back into the market a net amount of more than VND100,000 billion thanks to the old treasury bills maturing.

This move further increased the liquidity of the banking system, causing interbank interest rates to drop sharply again.

State Bank data shows that the average overnight interbank interest rate updated to November 17 was only 0.18%/year. Meanwhile, nearly a month ago, banks were borrowing from each other at an overnight interest rate of 2.5 - 2.7%/year.

Similarly, other terms also decreased sharply. 1-week and 2-week terms decreased to 0.36% and 0.46%/year respectively.

In the residential market, the wave of interest rate reduction has not stopped. The interest rate of 6%/year is almost rare, only appearing at some small private banks. At state-owned banks, the maximum interest rate only fluctuates between 5.0 - 5.3%/year.

Banks' liquidity is very abundant in the context of credit growth reaching only about 7.31% by early November, far from the credit target of 14%.

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