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Companies in Vietnam may be finding it harder to repay dollar debt in the wake of its latest dong devaluation but demand for greenback loans is rising on speculation that the exchange rate will be stable in the short term, bankers said.
The State Bank of Vietnam cut the interbank reference rate to 18,932 dong per dollar on Aug 18 from 18,544 previously, aiming to help control the trade deficit.
The move took some pressure off the dong and helped stabilise the foreign exchange market, traders said, but bids offered by banks were hovering near the ceiling allowed within the dong’s 3 percent trading band.
It also put an expected squeeze on certain businesses, including importers and those with dollar loans coming due, state media reported.
Nevertheless, demand to borrow dollars has risen since the move, bankers said on Monday.
A treasury manager at a Hanoi-based lender, who declined to be identified, said the demand for dollar loans at his bank started to edge up again following two months on a downward path.
“After the latest devaluation, borrowers seem to think that the exchange rate will stay unchanged for three to four months. This makes them feel confident enough to take loans in the short term,” he said.
“There is also speculation there may be future changes in the rate and that this latest devaluation is a sign of that. In such a case, it would be beneficial to borrow now and settle the loans before the next change.”
A currency trader in another Vietnamese bank confirmed the rising demand for dollar loans, saying most of loans were short term and would be due in a few months.
Dollar credit jumped 34.4 percent in the first seven months from the end of last year, the Vietnam Economic Times said on Aug. 25, quoting the central bank data.
The central bank in June tried to slow dollar lending by requesting lenders monitor their dollar loans. In June and July, dollar loan demand was falling as the gap between dong and dollar rates narrowed, bankers said.
With dollar loan demand increasing, banks recently announced they would raise the interest rates on dollar deposits to as high as 5.5 percent from around 4 percent, state media reported.
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