The central bank's sale of around $3 billion in U.S. dollars to banks in December and January meant dong funds were hard to come by, state-run Saigon Tiep Thi newspaper (www.sgtt.com.vn) said in an online report, citing anonymous financial sources.

"Liquidity in the banking system has faced constraints and this pressure continues when cash demand tends to rise around Tet, when it is tough for banks to raise funds," Saigon Hanoi Securities said in a note to customers.

Vietnam's markets are closed from Feb. 15-19 to mark Tet, the Lunar New Year festival, and bankers expect deposits to rise only after the holiday.

Dong rates rose on terms from overnight to two months, while dollar rates increased on all terms between overnight and 12 months, Reuters data showed.

Overnight dong rose to 10.10 percent from 9.16 percent a week ago, and one-week loans rose to 10.78 percent from 9.98 percent last Monday.

Deposits in banks last month grew a tiny 0.3 percent from December while loans increased 1 percent, the central bank said in a report on January's money markets. It gave no values.

Many banks are offering to pay dong deposits at 10.499 percent, up against the official ceiling of 10.5 percent for major banks. The central bank left its base rate at 8 percent for February.

Saigon Hanoi brokerage forecast a base rate rise after Tet.

Central bank Governor Nguyen Van Giau told reporters late last week that some tightening may be on the cards.

"In 2010, monetary policy may be tightening because of new targets," Giau was quoted by online Dat Viet newspaper (www.baodatviet.vn) as saying, adding that the main target was to stabilise the economy as well as business and consumer sentiment.

Giau reiterated the central bank had a target for money supply growth of 25 percent this year, slowing from 28.67 percent in 2009.

ANZ bank, in a report on Feb. 1, forecast the base rate could rise to 8.5 percent from June and 9.5 percent in December.

Prime Minister Nguyen Tan Dung has said Vietnam's economy would grow 7 percent in 2010 after 5.3 percent in 2009. Hanoi aims to keep inflation below 7 percent this year, although economists expect a higher rate.

Source: Reuters