The State Bank of Vietnam (SBV) has slashed annual interest rate caps payable on US dollar deposits to 0.5 percent for institutional depositors and 2 percent for individual depositors.

The circular issued by the SBV on June 1, 2011, stipulates that the interest rate caps cover all types of promotional costs and are applied for term-end payment.

The central bank’s move was intended to discourage economic entities’ dollar accumulation and strengthen the domestic currency.

The SBV also raised compulsory reserves in foreign currencies from 6 percent to 7 percent which received a number of mixed reactions.

The series of actions is believed to ease the downward pressure on the value of the Vietnamese dong and to enrich the dwindling national foreign reserves.

Foreign reserves earlier this year were estimated at 12.2 billion USD or nine import weeks from a level of nearly 24 billion USD at the end of 2008./.