Currency: Vietnamese dong weakens against dollar as black market premium widens
The Vietnamese dong continued its gradual decline against the US dollar, with both official and parallel market rates showing weakness as the gap between black market and central bank rates expanded.
Currency Movements
The State Bank of Vietnam (SBV) set the central exchange rate at 25,189 dong per dollar on September 22, representing a slight weakening from 25,186 dong the previous day.
However, market participants continued to trade at significantly higher rates, with Google Finance’s mid-market rate reaching 26,417.43 dong per dollar, up from 26,385 dong on September 19.
The divergence was more pronounced in Vietnam’s parallel currency market, where black market rates climbed to new highs.
The black market mid-rate reached 26,520 dong per dollar on September 22, compared to 26,490 dong three days earlier.
This represents a premium of 1,331 dong over the official central rate, translating to a 5.28 percent gap.
Black market dealers were quoting buy rates at 26,470 dong and sell rates at 26,570 dong per dollar, indicating continued strong demand for US currency among local traders and businesses.
Money Market Activity Surges
Vietnam’s money markets experienced significant activity, with government securities trading volumes showing dramatic increases across all maturities.
Seven-day repurchase agreements (repos) saw trading worth US$37.8 million on September 22, compared to zero activity on September 19.
The 14-day repo market expanded from US$16.3 million to US$37.9 million, while 28-day repos declined slightly from US$110.2 million to US$37.8 million over the same period.
The 91-day repo market showed the most dramatic swing, jumping from zero activity to US$37.8 million in trading value within three days.
Interest Rates Ease Across Maturities
Interbank lending rates showed broad-based declines across most maturities, suggesting improved liquidity conditions in Vietnam’s banking system.
The overnight interbank rate fell sharply to 3.89 percent from 4.54 percent, while one-week rates dropped from 4.70 percent to 4.08 percent.
Two-week rates remained relatively stable at 4.91 percent, down marginally from 4.93 percent.
Longer-term rates also declined, with one-month interbank lending rates falling to 5.07 percent from 5.19 percent, and three-month rates easing to 5.41 percent from 5.49 percent.
Six-month rates showed a slight increase to 5.83 percent from 5.78 percent, the only maturity to move higher.
Market Implications
Market analysts will be watching for any policy responses from the State Bank of Vietnam as the dong faces continued depreciation pressure against the strengthening US dollar.
Black market rates are indicative and may vary among dealers.
