Low Interest Rate Environment Maintained

According to data from Yuanta Vietnam Securities, last week the State Bank of Vietnam (SBV) injected only VND 485 billion into the market through open market operations with a 14-day term at a 4% interest rate. Meanwhile, VND 8.894 trillion matured via the reverse repo channel, resulting in a net withdrawal of around VND 8.409 trillion by the SBV for the week. Outstanding value via reverse repo fell to VND 27.637 trillion. Lending through collateralized securities auctions has remained low, and the SBV has consistently been in a net withdrawal position in recent weeks.

On the interbank market, the total trading volume rose by 13.8% compared to the previous week, reaching VND 2.3 quadrillion. Overnight and 1-week tenors recorded trading volumes of VND 2.192 quadrillion (12.3% WoW) and VND 84 trillion (62% WoW), respectively.

Interbank interest rates have been steadily declining in recent weeks. Last week, these rates trended downward from early to late week, with a sharp drop in short-term tenors: overnight rates plunged to 1.83% from 3.7% the prior week, and 1-week rates dropped from 3.9% to 2.3%. The VND-USD overnight interest rate spread remained high at -2.5 percentage points.

Deposit rates at commercial banks (CBs) remain at their lowest in two years, with the most significant declines seen in tenors over 12 months. The highest online deposit rate in the system—6.1% per annum—is offered by HDBank for 18-month terms; the 15-month term stands at 6.0% per annum. Similarly, VikkiBank lists 6.0% per annum for terms of 13 months and above. Most other CBs offer rates below 6% per annum. Some smaller banks like MBV, BacABank, VietBank, VietABank, PVCombank offer 18-month deposit rates close to 6.0% per annum, while the lowest rates for 12- and 18-month terms are offered by SCB (3.7-3.9% per annum). Big 4 banks (Agribank, Vietcombank, BIDV, VietinBank) continue to maintain their 12-month deposit rates unchanged.

Official SBV statistics show VND deposit interest rates in May ranged from 4.8% to 6.0% per annum for tenors over 12 to 24 months, and 6.9-7.1% per annum for tenors above 24 months.

According to the SBV, in May, the average VND lending rate by domestic CBs for new and existing loans was between 6.6% and 8.9% per annum. The average short-term VND lending rate for prioritized sectors was around 3.9% per annum, lower than the SBV’s maximum short-term cap of 4%. The average USD lending rate for both new and outstanding loans ranged from 4.1% to 5.0% per annum.

Mr. Nguyễn Thế Minh, Head of Analysis at Yuanta Vietnam Securities (YSVN), assessed that while interest rate pressure is building due to a recovering real estate market and growing capital demand, the overall interest rate level may remain low in line with the government’s economic growth support direction.

Exchange Rate Facing Short-term Pressure

Regarding exchange rates and the forex market, the global monetary policy context—reflected in central bank (CB) meetings—shows that major CBs (BoJ, Fed, and BoE) have mostly kept benchmark rates unchanged and expressed cautious views on upcoming economic developments, amid rising Middle East tensions. In the U.S., May retail sales fell sharply by 0.9%, surpassing the forecasted 0.5% drop and marking the steepest decline since January, following a 0.1% dip in April, as buying eased after a tariff-driven spike.

Furthermore, in the June 18 FOMC meeting, the Fed maintained interest rates and continued its quantitative tightening (QT) program at $40 billion/month, reflecting a cautious economic outlook. The Fed also noted inflation may rebound and further data on tariffs is needed.

The USD Index surged early in the week following Israel’s preemptive strike on Iran, but gains cooled after the FOMC meeting, as the Fed held rates steady. By the end of the week, the USD Index rose slightly by 0.53% from the previous week. However, major currencies like the EUR, GBP, and JPY continued to strengthen against the USD, with weekly gains of 0.2%, 0.9%, and 1.4%, respectively.

The USD/VND exchange rate rebounded after stabilizing the previous week. Specifically, the central rate, VCB buying rate, VCB selling rate, and the free market rate rose by 0.22%, 0.23%, 0.22%, and 0.11%, respectively, compared to the previous week.

Demand for USD remains high in the market, with banks trading near the ceiling selling rate, and the free market rate rebounding after falling in late May. Yuanta Vietnam noted that the U.S. involvement in the Iran-Israel conflict adds significant short-term pressure on the USD/VND exchange rate.

According to Mr. Nguyễn Thế Minh, the USD/VND exchange rate may remain elevated due to less abundant foreign reserves and a lower trade surplus compared to the same period last year. However, exchange rate pressure may ease if the Fed cuts rates in the second half of 2025 and if the U.S. encourages Vietnam to allow the VND to appreciate during tariff negotiations.

Speaking on Yuanta Vietnam’s “Capital Flow Spot” program themed "Wonderland – The Forgotten Land", Mr. Minh also forecast that by the final review deadline for the tariff negotiation results on July 8, Vietnam might face a 24% U.S. import tariff rate. The chance of achieving a more favorable rate (<24%) or securing a 90-day delay is quite low. This will be one of the key factors investors should watch as market sentiment remains cautious.