VINACHEM

Local enterprises are borrowing more foreign currency instead of Vietnamese dong because of lower bank interest rates.

The interest rate per annum for the US dollar is 5 – 7 percent, and for VND, 13.5 – 15 percent.

"The risk in exchange rate fluctuation is exceptionally small, and experts believe that for the next six months, the exchange rate will be stable. As a result, foreign currency loans at banks are growing," said Nguyen Hoang Minh, vice director of the State Bank of Vietnam (SBV) 's HCM City office.

For the first five months of the year, the number of Vietcombank's foreign currency loans rose 8 percent while VND loans were at a standstill.

In the inter-banking market during the final week of May, the interest rate for foreign currency rose only slightly for one-week and six-month loans.

But then it experienced a sharp rise for three-month loans, from 1.11 percent to 2.23 percent per year.

For the last two months, the exchange rate has remained stable and prices on the black market were lower than in the inter-banking market. This has helped banks to easily attract supply.

The latest SBV report confirmed that the foreign currency market was stable, and that the situation would reduce speculation.

A recent survey on the Trade Trust Index done by banking giant HSBC found that small – and medium-sized import-export enterprises of the United Arab of Emirates, India and Vietnam were the most optimistic about trade relations for the next six months.

Only half of the business community, compared to 81 percent in 2009, believed that the exchange rate of foreign currency would negatively affect their operations.

In addition, more import-export companies (28 percent) believed that State policies would help them develop, compared to 9 percent in 2009.

"The results of the survey reflect changes in the market for the last six months as well as the future for the next six months. More and more businesses believe in a global economic recovery," said Do Thuy Nhu Thuy, a senior official at HSBC Vietnam.

However, bank leaders also warned that enterprises should take out insurance on exchange rates./.

(Source: en.vietnamplus.vn)