Businesses concerned about rising exchange rate pressure

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

A bank teller counts the dollar at a transaction office in Hanoi. (Photo: VNA)

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 VND per dollar.

On the unofficial market, the dollar price on April 24 also increased by 90 VND per dollar for buying and 110 VND per dollar for selling compared to last week to reach 25,770 VND and 25,870 VND 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 VND per dollar, 23 VND 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 dollar price has caused difficulties to many domestic companies.

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

Nguyen Dang Hien, General Director of Tan Quang Minh Company, 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 4-5%. However, product selling prices have not increased for many months due to weak purchasing power.

To limit damage from the rising exchange rate, the Tan Quang Minh Company 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 will not be affected if the Vietnamese dong depreciates by some 2-3% 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 gasoline price, 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 and in accordance with regulations, to reduce risks when exporting in the context of the current exchange rate fluctuations.