The State Bank of Vietnam has raised interest rates on its treasury bills and outgoing loans by 10 basis points and 25 basis points, respectively. This is in line with unrelenting pressure on the dong that has seen the local currency hovering at all-time highs for weeks.
Whereas the bank has been spending its US dollar reserves in an attempt to keep the dong from devaluing too much, the reality is that it has already spent a lot–about US$2.95 billion according to ACB data and this has done little to weaken US dollar demand. With this in mind, an interest rate hike could be on the horizon.
Of note, yesterday Bloomberg ran an article about speculation from Maybank that an interest rate rise in Vietnam could be as soon as next week.
See also: The Dong’s Wild Ride: Unpacked