Vietnam banks may increase dollar purchases: experts

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Banks with ample funds may start hoarding US dollars again as lending money on the interbank market at cheap interest rates has become less profitable, financial experts said.

There is concern that dong interest rates on the interbank market are too low, which will drive banks toward dollar assets, a general director of a Ho Chi Minh City-based bank said. Such a trend could lead to a dollar shortage, he warned.

Industry insiders also said around VND64 trillion worth of central bank bonds will mature over the next few months. That means a large amount of money will flow back to commercial banks.

"If interbank rates stay low at 3 or 4 percent as seen recently, people may reconsider converting their dong assets into dollars," said a financial expert who asked not to be named.

The State Bank of Vietnam said early this month that it had injected about VND180 trillion into the economy, buying US$9 million worth of dollars since the beginning of the year.

Analysts said the move helped improved the liquidity of the banking system, but at the same time could result in greenback scarcity later.

Pham Hong Hai, deputy general director of HSBC, said the exchange rate will hover around VND20,850 per dollar through September, before rising in the final months of the year when dollar demand for imports increases.

Hai noted that the exchange rate could also rise if global economic conditions worsen, causing foreign investors in Vietnam to withdraw their money.

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