Enterprises’ mixed feeling driven by interest rates, exchange rates

Opposite feeling caused by interest rates, exchange rates

Over the past few months, the sharp increase in the USD/VND exchange rates has brought both gladness and worries to enterprises.

The sharp exchange rate increase over the past months has brought both gladness and worries to enterprises – photo: Linh Linh

Nguyen Van Nhut, General Director of Hoang Minh Nhat JSC (Can Tho), said that rice prices have continuously increased since the year’s beginning. More orders and increased exchange rates have benefited export businesses.

Nguyen Viet Hung from Dong Anh Licogi Mechanical JSC said that interest rates have been eased, but the company is still worried about higher exchange rates in addition to falling orders, high inventory, and capital backlog. Every time interest rates decreased, exchange rates increased and greatly affected import businesses. Therefore, Hung urgently requested the SBV to take measures to stabilize the exchange rates.

More orders and increased exchange rates have benefited export businesses – photo: Nguyen Van

According to economic experts, the move by the SBV and credit institutions to increase foreign currency prices at this time are suitable to keep up with the increased price tendency of the world currency market. This will more or less affect production and business activities from now to the year’s end.

Management of exchange rates requires harmony

Explaining the reason of bills issuance to draw money after more than six months of suspension, SBV Deputy Governor Pham Thanh Ha said that currently, the SBV is closely monitoring the foreign currency market and is managing to stabilize exchange rates.

Experts also say that, in the context of excess system liquidity and continuous increase in exchange rates, this move is killing two birds with one stone. However, this does not mean a return to tightening monetary policy.

Dr. Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said that with the current economic growth context, the SBV must continue to loosen monetary policy. This also means that the exchange rate will have to increase to a certain extent to reduce interest rates to support people and businesses.

According to economic expert Truong Van Phuoc, the exchange rate pressure in the last months of the year is certain, when the difference in domestic and foreign interest rates changes. However, the factors affecting the exchange rate are all in favor of the Vietnamese currency. Comparing with other major economies, Vietnam’s inflation is not high, and the interest rate level of the Vietnamese economy is still at a higher level.

The fact that countries are starting to be easier in tightening monetary policies to prevent the risk of economic recession, along with the domestic stable macroeconomics is also the basis for the Vietnamese Dong not to decline too much.

Regarding the concerns of import businesses about exchange rates, leaders of many banks recommended that businesses use derivative products to prevent exchange rate fluctuations.

SBV Governor Nguyen Thi Hong said the SBV has always kept a close watch on this issue every day because the exchange rate is also part of businesses’ financial costs. She affirmed that management of the exchange rate is difficult and requires harmony.