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The US dollar: now more precious than gold?   2010-03-24 - VietNamNet/DTCK

As commercial banks continuously raise the deposit dollar interest rates, they lower deposit gold interest rates because banks lack dollar capital and are suffering from ‘gold indigestion’.


The US dollar deposit interest rates offered by Dong A Bank now hover around 4.2-4.5 percent for 12+ month deposits. High interest rates of 3.8-4.11 percent per annum are offered for shorter-term deposits.


Similarly, at HD Bank, the US dollar deposit interest rate has just been raised by 0.1-0.45 percent. The highest deposit interest rate offered is 4.8 percent per annum (for nine month term and higher deposits), while the lowest rate is 3.8 percent per annum (for one month deposits).


Dai A Bank has raised the dollar deposit interest rates sharply, now providing 4.7 percent per annum for 6-36 month term deposits and 3.7-4.4 percent for 1-3 month deposits.


Economists note that deposit interest rates in foreign currencies have generally increased by 1-1.5 percent.


Explaining the increases in dollar deposit interest rates, banks observe that the demand for dollar capital from businesses has expanded, especially after the State Bank of Vietnam allowed banks to apply negotiated interest rates for medium and long-term loans.


Many businesses, including exporters, have shifted to borrowing in dollars to enjoy lower interest rates, especially when the dong lending interest rate has jumped to 1.5 times higher than its previous 12 percent per annum.


Deputy General Director of ABBank, Pham Quoc Thanh, confirms that the demand for dollar is rising, thus forcing banks to seek dollar capital sources to develop credit. Thanh’s bank is lending at 5-7 percent in foreign currencies, and 14-17 percent in dong.


Asia Commercial Bank reports increases in dollar-based outstanding loans. The bank has raised the dollar deposit interest rate since mid-March 2010. Currently, 4.2 percent is offered for 36 month deposits.


While the dollar interest rates keep rising steadily, gold interest rates have has dropped.  Dong A Bank is paying 0.5 percent for gold deposit certificates on 24 month plus deposits), while those of 1-12 months receive interest rates of only 0.15-0.33 percent.


Since March 20, Dai A Bank has slashed SJC gold deposit interest rates, which have decreased by 0.35-1.25 percent.


Eximbank also cut gold deposit interest rates on March 17, now offering 0.2 percent per annum for 4-12 month term deposits.


At ACB, Vietcombank and OCB, the highest rate now applied is 0.5 percent for long-term deposits and nearly zero percent for short-term.


According to Dau Tu Chung Khoan, some commercial banks do not even quote gold deposit interest rate in an effort to restrict deposits.


Banks now refuse to mobilize capital in gold because demand for gold loans has bottomed-out. ACB reported they can lend 40 percent of the total gold capital mobilized.

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