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HANOI - Potential US dollar borrowers in Vietnam remain gun shy about taking out greenback loans three weeks after the central bank devalued the dong, despite signs that lenders have ample supplies, bankers said on Monday.
Demand for dollars was expected to pick up later in 2010, they said, likely piling renewed pressure on the currency.
"There could be a light fever this year," a currency dealer in Ho Chi Minh City said, noting that most of the demand came from importers.
The central bank cut the dong exchange rate by around 2 percent against the dollar on Aug. 18, saying the move was to help control the trade gap. It was the third devaluation since last November.
While rates on dollar deposits and loans remained stable in the second half of August, according to central bank reports, Eximbank said it had raised its dollar deposit rate by 0.2 percentage points to 4.65 percent as of last Wednesday.
It was the lender's second rate increase for dollar deposits since Aug. 18, a move bankers said was taken to catch up with the rising demand for dollar loans.
Banks in Vietnam had built up their dollar holdings before the devaluation so they were now long the dollar, the HCMC-based dealer said.
"We have dollars now sitting idle but have not found borrowers because they are afraid of the exchange rate risk," a Hanoi-based domestic bank executive said.
Industry officials have suggested that banks increase dong loans between now and year-end to meet an annual credit growth target of 25 percent set by the central bank. Loans at the end of July grew nearly 13 percent against last December, the central bank has said.
Bankers, however, said it was tough to increase dong lending now, given relatively high rates banks were paying to depositors.
"It is difficult to lower interest rates because banks have to maintain their market share and protect depositors, but in doing so they cannot cut deposit rates," the Hanoi-based bank executive said.
Banks were paying between 11.0 percent and 11.2 percent for dong deposits with terms from three months to one year, and lending the domestic currency at 13-15.5 percent.
Market rates were above a government goal which envisaged banks cutting dong deposit rates to 10 percent and lending rates to 12 percent to spur an expansion of credit to support economic growth.
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