Vietnam Money-Dong rates rise, dollar liquidity good

HANOI, Oct 26 - Short-term lending rates in the Vietnamese dong have risen on the interbank market, partly supported by corporate demand as the economy is recovering, bankers said on Monday.

Fixings for overnight loans <VNIBOS> rose to 7.33 percent on Monday from 7.25 percent last Friday, Reuters data showed.

But rates on loans for longer terms of up to 12 months eased as officials in Vietnam were still debating whether a second stimulus package was needed to spur growth.

"The economy still needs one more stimulus package to ensure a solid foundation for stable economic growth" and the second package could be a fiscal or monetary package, Le Duc Thuy, head of the national financial advisory body, said. In February the government started subsidising 4 percentage points of bank loan rates for businesses under the first stimulus package.

Vietnam's economy could grow 6.8 percent in the last quarter from a year earlier after expanding 5.76 percent in the third quarter, the government has said. The economy is targetted to expand 6.5 percent next year after 5.2 percent in 2009.

The dong's weaker trend over the past month has encouraged more corporate dollar sales to banks and thus helped boost liquidity, bankers said.

Last week the inconvertible dong <VND=> was allowed to weaken to 17,852-17,857 dong per dollar on the interbank market, from 17,851-17,854 dong per dollar the previous week.

"The liquidity on the foreign exchange market has improved," the State Bank of Vietnam, the central bank, said in its weekly money market review, adding that many commercial banks were able to buy foreign currencies from customers.

For text of the report, click on [ID:nHAN439997]

The central bank lowered the official exchange rate to 17,005 dong per dollar on Monday from 17,002 dong last Monday and 16,994 dong a month ago. Banks are allowed to trade dollar/dong within a band of 5 percent of the central bank's mid-point rate.

On the unofficial market, the dong has weakened 1 percent in the past month to 18,420-18,470 dong per dollar on Monday.

It has fallen steadily as Vietnam seeks measures to support exports, which the Industry and Trade Ministry has forecast would fall up to 9 percent this year.

October's trade deficit would widen to $1.9 billion from a gap of $1.52 billion last month, with exports of $4.75 billion and imports at $6.65 billion, the Planning and Investment Ministry's Investment newspaper said on Monday.

Another report said Vietnam's trade deficit in the first 10 months of this year was likely to have fallen around 47 percent from a year earlier to $8.78 billion, after exports fell 13.8 percent and imports dropped 21.7 percent. [ID:nHAN469153]

Last week the central bank said Vietnam's foreign reserves were sufficient to cover 12 weeks of imports.

It said Vietnam would borrow $1 billion from the World Bank this year and in 2010, as well as $1 billion annually from Japan in 2010-2012 to shore up its reserves. [ID:nHAN361118] [ID:nHAN419355].