Many people with dollars in HCM City who have opted for the dong because of the big gap in the deposit interest rates. — File Photo

HCM CITY (Biz Hub) — Huynh Anh Nhan of HCM City's Tan Binh District has decided to convert the US$40,000 he had in a bank into dong because of the very low interest rate on dollar deposits.

"We have this money for my daughter's education in the US in the next two years," he said.

"But now we want to deposit the money in dong since the interest rate on dollar deposits by individuals has been cut to just 0.25 per cent.

"The interest rate on one-year dong deposits is 7 per cent. And, the State Bank of Viet Nam (SBV) has promised to keep the exchange rate steady until year-end."

Nhan is among many people with dollars in HCM City who have opted for the dong because of the big gap in the deposit interest rates.

Nguyen Hoang Minh, deputy director of the SBV's HCM City office, said people are converting their dollars into dong after his bank this week scrapped the interest ceiling on corporate dollar deposits to zero per cent and individual deposits to 0.25 per cent.

"The central bank's move has also encouraged many corporate customers to sell their dollars to banks."

On September 28 banks' dollar purchases increased by around 2.7 per cent compared to normal, while sales has been at 60 per cent, he said.

Speaking about the SBV's decision to cut the interest rates on dollar deposits, deputy governor Nguyen Thi Hong said though the monetary and foreign exchange markets are pretty stable, there are signs of some accumulating foreign currencies.

"The central bank had to make the move to back the dong and check the dollarisation of the economy," Thoi bao Kinh te Viet Nam (Vietnam Economic Times) newspaper quoted her as saying.

Analysts have hailed the SBV's decision to cut the dollar deposit interest rates, saying it would help stabilise the dong and prevent dollarisation of the economy. — VNS