Vietnam businesses concerned about rising forex woes

Cooling measures: A man uses a mobile phone at a flower shop in Hanoi. The sharp increase in the US dollar has caused difficulties to many domestic companies. They have been advised to search for domestic raw material sources to replace imports. — AFP

HANOI: Though the State Bank of Vietnam (SBV) has announced it is selling the US dollar to intervene in the foreign exchange or forex rate since April 19, the greenback has remained high directly affecting many domestic enterprises.

The dollar/dong exchange rate listed at VietinBank and BIDV on Tuesday was at 25,180 dong and 25,485 dong per dollar for buying and selling, an increase of 20 dong compared with the previous session.

Vietcombank’s rate also stood high at 25,145 dong and 25,485 dong per dollar for buying and selling.

This was the sixth session that the selling price of the dollar at banks has consecutively broken its peak, moving closer to the threshold of 26,000 dong per dollar.

On the unofficial market, the dollar price on Tuesday also increased by 90 dong per dollar for buying and 110 dong per dollar for selling compared to last week to reach 25,770 dong and 25,870 dong per dollar for buying and selling, respectively.

In the context of the sharp appreciation of the dollar, the SBV on April 19 announced it was selling the greenback to banks with negative foreign currency status at the price of 25,450 dong per dollar, 23 dong per dollar lower than the SBV’s cap, to influence the exchange rate.

This move is expected to help cool down the domestic exchange rate but it is continuing to accelerate due to the high level of the dollar in the international market.

The sharp increase in the US dollar has caused difficulties to many domestic companies.

A seafood import company in Hanoi, which declined to be named, calculated that for each US$100,000 order paid to a partner, it would have to spend an additional 100 million dong to 150 million dong.

Nguyen Dang Hien, general director of Tan Quang Minh Co, said the beverage manufacturing industry is facing many difficulties, including increased exchange rates.

According to Hien, his company currently has to import some types of orange juice, some flavours and plastic beads from other countries and most have to be paid in the dollar, which has increased production costs by 4% to 5%.

However, product selling prices have not increased for many months due to weak purchasing power.

To limit damage from the rising exchange rate, Tan Quang Minh Co is trying to promote the search for domestic raw material sources to replace imports, and increase exports to markets paying in the dollar, Hien said.

Director of SKD Vietnam Mechanical Company Nguyen Van Ket said companies’ plans would not be affected if the Vietnamese dong depreciates by some 2% to 3% this year as previously forecast.

However, the dong has so far strengthened by nearly 5%, while raw material prices, input and international transportation costs remain high due to rising petrol prices, which cause more difficulties for businesses.

In the context of the rising exchange rate, experts recommend that importing businesses need to pay attention to exchange rate risk prevention tools, and carefully consider the terms in foreign currency loan contracts.

Besides, it is also necessary to maximise domestic resources and find alternative domestic partners to gradually reduce dependence on import markets to lower costs and limit risks when the world market fluctuates.

In addition, businesses should also choose banks with good trade support capabilities, and consider using derivative financial instruments and swap contracts appropriately in accordance with regulations, to reduce risks when exporting in the context of the current exchange rate fluctuations. — Viet Nam News/ANN

Follow us on our official WhatsApp channel for breaking news alerts and key updates!


Next In Business News

Nationgate shares to transfer to Main Market on May 24
Zantat aims to expand bioplastic product line
Sime Darby's industrial division drives 3Q net profit to RM340mil
MSM Malaysia registers 1Q net profit of RM41.71mil on improved margins
FBM KLCI maintains positive sentiment despite US rate jitters
SME Corp targets six MSMEs to be listed on Bursa Malaysia by 2026
MoF wants new LEAP Market measures to be ready by early next year
Vibrant semiconductor industry fortifies Malaysia's role as reliable regional partner - PM
Capital markets key to boosting SME financing, promoting innovation
SC aims to grow MSME, MTC capital market fundraising to RM40bil by 2028

Others Also Read