(Tuoitre, Reuters) - Vietnamese dong lending rates rose on Monday from late last week because of strong demand for cash two weeks before the country marks the Tet or Lunar New Year, and bankers said rates would stay elevated until after Tet.After the week-long festival that ends on February 21, liquidity is expected to improve, with the volume of bank deposits expected to rise, an industry analyst said.
The Lunar New Year, or Tet, starts on February 14 and, to prepare for the holiday, companies need cash to pay bonuses and buy consumer goods, driving up demand for cash.
Certain interbank rates rose as much as 2.0 percentage points at one stage, with the most active lending on the one-week and overnight loans, the State Bank of Vietnam said in its money market review on Monday for the week ending January 28.
On Monday, fixings for overnight loans rose to 9.16 percent, from 8.79 percent last Friday, and the rate for one-week loans increased to 9.98 percent from 9.69 percent last Friday.
The central bank said it kept the base rate unchanged at 8 percent for February, meaning the ceiling remains at 12 percent.
"After Tet, the amount of idle funds held by companies and residents is expected to rise significantly," chief analyst Dang Lan Huong of Au Viet Securities wrote in a research note, citing expected cash from pre-Tet sales, year-end bonuses and overseas remittances.
"This will help increase banks' liquidity significantly," Huong wrote in research published by Monday's Securities Investment magazine.
The central bank has extended the duration of short-term loans it offers banks in open market operations to four weeks, and it has increased the volume of cash it has lent banks.
Interbank transactions in the week ending Jan. 28 rose 10 percent from a week earlier to VND17.33 trillion (US$938.5 million), central bank data showed.
As of Monday the central bank cut the compulsory reserves banks must keep on non-term foreign currency deposits and on those with terms of up to 12 months to 4 percent from 7 percent, and the reserves on deposits with terms longer than 12 months to 2 percent from 3 percent.
