The August 5 trading session witnessed remarkable developments in the currency market when the State Bank simultaneously reduced two types of operating interest rates: the interest rate on loans secured by valuable papers (OMO) and the interest rate on treasury bills.

Specifically, the State Bank has lent nearly VND13,669 billion to 7 market members through the OMO channel with a term of 7 days and an interest rate of 4.25%/year. Thus, compared to the previous session, the operator's OMO lending scale has more than doubled and the lending interest rate has decreased by 0.25 percentage points, from 4.5%/year to 4.25%/year.

This is the first time the State Bank has reduced interest rates on the OMO channel since the end of 2023. Previously, the agency had adjusted this interest rate twice in mid-April and May 2024, from 4% to 4.25% and then from 4.25% to 4.5%.

Also in the August 5 session, the State Bank issued VND3,250 billion worth of treasury bills with a term of 14 days, the winning interest rate decreased from 4.5%/year in the previous session to 4.25%/year.

Credit growth has been boosted recently, causing interest rates to increase across the board.

The reduction of the above two interest rates is said to be aimed at supporting liquidity for the banking system after a period of increase to reduce exchange rate pressure. This move takes place in the context of capital mobilization speed being much lower (only 1/3) compared to credit growth speed in the first 7 months of the year. Over the past few months, banks have simultaneously adjusted to increase mobilization interest rates to meet credit demand that is forecast to continue to increase more strongly in the last months of the year.

Besides, the move of the State Bank is considered appropriate in the context of gradually decreasing exchange rate pressure.

According to data provided by the State Bank at a monetary policy meeting with the Prime Minister yesterday afternoon, as of July 31, the central exchange rate was at 24,255 VND/USD, up 1.63% compared to the end of 2023, a low and stable average compared to currencies in the region and the world.

Meanwhile, in the free market, the USD exchange rate also decreased to 25,630 VND/USD, narrowing the depreciation of the VND to about 3.7% compared to the end of 2023 and compared to the depreciation of up to 4.9% at the end of June 2024.

Previously, two increases in interest rates in the open market helped narrow the gap between USD and VND interest rates in the interbank market, thereby reducing pressure on the exchange rate. At the same time, the State Bank has also been selling foreign currency to intervene to increase the supply of USD in the market since the end of April.

In the context of cooling down exchange rate pressure, the State Bank's reduction of OMO interest rates and winning interest rates on treasury bills is considered appropriate to help support system liquidity, contributing to cooling down interest rates in the interbank market.