A bank teller counts cash at a transaction office in Hanoi.

Overnight interest rate in the interbank market has surged to more than 4%, the highest level in the past nine months, data from the State Bank of Vietnam showed.

The rate on February 21 had increased by nearly 4 times against the end of last week, from 2.15% to 4.14%. It meant after just one trading session, the rate nearly doubled and reached its highest level since the end of May 2023. It was much higher than the peak level of 2.38% recorded during the peak payment period near the Lunar New Year.

With the surge, the rate for overnight term is currently even higher than that of one-week to three-month terms.

In the interbank market, overnight term accounts for up to 90% of total transaction value.

Along with the overnight term, interest rates at two other key terms also increased sharply compared to the end of last week, of which one-week term was up from 1.27% to 3.81%; two-week term was up from 1.39% to 3.02%; and one-month term was up from 1.85% to 2.55%.

According to experts, the sharp surge of the overnight rate, along with high transaction turnover, meant liquidity of the banking system is showing signs of shortage, but it is only in the short term and it will likely cool down soon in the coming trading sessions.

Interbank interest rates have increased significantly after credit growth unexpectedly accelerated in the last month of 2023. In December 2023 alone, credit of the banking system surged by up to 4.35% compared to the previous month, bringing credit of the whole year to 13.5%.

Experts expect the sharp increase in overnight interbank interest rates will contribute to reducing pressure on domestic exchange rates when the US dollar has strongly recovered in the international market. The greenback price is currently listed at 24,390 VND per dollar for buying and 24,790 VND per dollar for selling, an increase of 190 VND compared to before the Lunar New Year holiday.

In a newly released report, analysts from the Vietcombank Securities Company (VCBS) forecast the Vietnamese dong may still devalue against the dollar when interest rates continue to break deep into the bottom zone.

The development of the exchange rate will depend largely on foreign currency supply from direct and indirect investment cash flows, and remittances, VCBS analysts noted./.