Vietnam Cuts Dollar Rate Cap to Discourage Greenback Holdings

  • Vietnam central bank cuts dollar deposit rate cap to 0%
  • Vietnam to keep nation's currency and interest rates stable

Vietnam’s central bank cut the dollar rate cap to zero to deter hoarding of dollars while it sees no significant impact from the U.S. rate hike.

The country’s monetary authority cut the dollar deposit rate cap to zero from 0.25 percent for individual accounts, effective Dec. 18, according to a central bank statement on its website. The rate cap on non-credit institutional dollar deposits remains at 0 percent. It last cut dollar deposit rate caps Sept. 27.

Vietnam’s dong fell to the brink of its permitted trading range this week, as China’s yuan declined to a four-year low before the first U.S. interest-rate increase in almost a decade. The nation’s central bank said it sees no significant impact from the Fed rate hike.

The authority will continue measures to keep the dong and interest rates stable "in the coming time," Deputy Central Bank Governor Nguyen Thi Hong said in a statement Thursday evening. The State Bank of Vietnam has seen “positive developments” in the supply and demand of foreign currencies in the Vietnamese money market recently, she said. She cited a 17 percent increase in disbursed foreign investment and a trade surplus in November.

The dong weakened as much as 0.1 percent to 22,546 a dollar earlier today, before trimming its loss to trade at 22,529 at the close in Hanoi, according to prices from local banks compiled by Bloomberg. It can trade as much as 3 percent on either side of the official reference rate, which has been left unchanged at 21,890 since the third devaluation of this year on Aug. 19. The weakest level permitted by the current range is 22,547.

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