Why is the USD savings interest rate 0%?

(NLĐO) – Increasing interest rates on USD savings deposits could create a shift in sentiment from VND to USD, potentially leading to renewed market risks.

From November 20th, Decision No. 2410/QD-NHNN of the State Bank of Vietnam, which stipulates that the maximum interest rate for USD deposits of organizations and individuals is 0%/year, will come into effect.

The State Bank of Vietnam stated that the issuance of this new decision aims to ensure consistency in the legal basis with the circulars regulating deposit interest rates, amending the legal basis for issuance while not changing the deposit interest rates themselves.

Therefore, the interest rate on foreign currency deposits remains at 0% per year, unchanged for many years.

Interest rates on USD deposits continue to be maintained at 0%.

Previously, during a question-and-answer session in the National Assembly, Representative Pham Van Hoa (from the Dong Thap province delegation) questioned the Governor of the State Bank of Vietnam: Why do banks have to borrow foreign currency from abroad at high interest rates while only paying 0% interest on USD deposits for the public?

Governor Nguyen Thi Hong stated that previously, Vietnam's exchange rate fluctuated very strongly because those holding USD did not sell, while those without a need increased their purchases, leading to a sharp increase in demand for foreign currency and causing the exchange rate to rise, resulting in macroeconomic instability.

Since 2016, the State Bank of Vietnam has consistently implemented comprehensive solutions, steadfastly pursuing the goal of controlling inflation to stabilize the value of the Vietnamese Dong. It has combined interest rate and exchange rate policies to make the Vietnamese Dong more attractive, including bringing USD deposit interest rates to 0%. Exchange rate management is based on a central exchange rate, with daily fluctuations within a 5% range, thereby reducing dollarization, limiting foreign currency hoarding, and increasing foreign exchange reserves.

Currently, although the level of dollarization in the economy has decreased, it still remains.

"This is an effective policy that brings macroeconomic stability. If we increase USD deposit interest rates now, those holding foreign currency will benefit from both exchange rate fluctuations and interest on their foreign currency deposits… this will create a psychological shift from VND to USD. In that case, the market risks returning," said the Governor of the State Bank of Vietnam.

Regarding the USD exchange rate, on the morning of November 17th, commercial banks were trading USD at around 25,190 VND/USD for buying and 25,512 VND/USD for selling, an increase of more than 40 VND per USD compared to the end of last week.

Since the beginning of the year, exchange rates at banks have increased by more than 4%, amidst a rapid rise in the USD price on the international market since the beginning of October.

Source: https://nld.com.vn/lai-suat-hom-nay-17-11-vi-sao-lai-suat-gui-tiet-kiem-usd-la-0-19624111709045316.htm