Vietnam Money-Interbank rates steady after rises, dong gains

By Ho Binh Minh

HANOI, June 30 (Reuters) - Vietnamese banks kept dong interbank rates steady on Monday after raising them in the past week as money supply remained tight, while lending rates eased after the central bank barred lenders from adding fees to loans.

Annual inflation is galloping higher, hitting 26.8 percent in June due to rising food prices, and the government has carried out a number of measures to try and stem the rise in prices.

The State Bank of Vietnam, or central bank, said in a market review the dollar/dong exchange rate was more stable after it doubled the daily trading band to +/- 2 percent to address risks in the face of mounting selling pressure on the currency.

The central bank has recently raised interest rates, gradually lowered the value of the dong and sold dollars.

Ho Chi Minh City-based Dragon Capital fund said it expected the central bank to use these strategies in various combinations to stablise prices in coming weeks.

"Not as policies in their own right, but as part of the general strategy of balancing growth with stability," the fund said in a note. "In this context, slower first-half GDP of +6.7 percent is not to be agonised over."

Vietnam's trade deficit, which is raising pressure on the dong, nearly tripled for the six months through June to $14.78 billion [ID:nSGE000034].

Faced with an overheating economy, the government has cut its 2008 growth target to 7 percent from 8.5-9 percent.