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  Banking Finance

Commercial banks hesitate to raise US dollar interest rate

Vietnamese commercial banks do hesitate to raise the US dollar interest rates despite a US Federal Reserve (Fed) decision to raise interest rates a quarter percentage point on August 10.

Vietnamese experts are concerned that the Fed’s decision to raise rates, the second time since July, may pressure domestic banks, to raise their own dollar interest rates.

However, many banks said they would not follow the Fed right away, explaining that if they raise their rates, people will switch their deposit from Vietnamese dong to US dollar thereby creating a potential dong shortage.

Recently many Vietnamese have begun depositing money in US dollar accounts as the country’s consumer price index has steadily risen since the beginning of 2004. The index in the first seven months of 2004 rose by 7.7 percent.

Director of Technological and Commercial Joint Stock Bank Nguyen Duc Vinh said his bank would not adjust dollar interest rates as they were at a reasonable level.

The Fed decision was expected and does not effect domestic banks’ rate policies. As for our bank, we have obtained our deposit target at the current rate level, so there’s no need for us to take action at the moment, Vinh commented.

Immediately after the Fed raised interest rates to 1.25 percent on July 1, many private banks including Techcombank, Asia Commercial Bank and Saigon Thuong Tin Commercial Stock Bank announced rate rises on dollar accounts of between 0.1 and 0.4 percent per annum.

The US dollar exchange rate increased 4 dong on August 11, trading at VND15,763 per dollar. Euro fell 1.7 percent to close at VND19,116. Gold also declined by VND10,000 per tael, to VND7.67 million. - (12/08/2004)

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