Vietnamese importers fret over dollar rate
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The dollar gained against the Vietnamese dong on Tuesday as the U.S. Federal Reserve raised interest rates last week.
As of 3 p.m. Tuesday, dollar selling prices reached 22,810 at some currency exchange points in Ho Chi Minh City. At Vietcombank, BIDV and Eximbank, the dollar was being sold for VND22,880, 22,885, and 22,890, respectively.
Buying prices also rose to VND22,800-22,815 per dollar at local banks by 3 p.m. Tuesday.
The USD/VND exchange rate has increased by VND40-45 from June 13 when the Fed upped dollar interest rates for the second time this year to between 1.75 and 2.00 percent, ending the pledge to keep rates low enough to bolster the economy for “some time.” It signalled it would tolerate above-target inflation at least through 2020.
High dollar prices will create difficulties for Vietnamese import businesses, economist Nguyen Tri Hieu said.
Viet Steel is a company which imports 1.5 million tons of raw materials every year for steel production. “As 80 percent of our material is imported, the company will be affected by the dollar hike,” said chairman Do Thuy Thai.
The company leaders are discussing increasing the prices of steel products to retain profit, Thai said.
As a small import business, the Como Textile Company is also worried about the high rate of the U.S. dollar. “We often import 60 percent of our material, thus this will be a big challenge for the company in the future,” chairman Nguyen Huu Phuc said.
However, the higher dollar rate is not a completely adverse development for Vietnam. Export businesses will enjoy the high rate as they often change U.S. dollars to Vietnamese dong, economist Nguyen Tri Hieu said. He added that they should push further in manufacturing and take foreign currency loans as interest rates are currently low.
Hike continues
“As 80 percent of our material is imported, the company will be affected by the dollar hike,”
As the U.S. economy “appears to be in a pretty good place” to U.S. Federal Reserve officials, they plan to increase the interest rate two more times this year.
Vietnamese experts are not too worried. They are confident that these hikes won’t affect the country’s economy in any major way.
Despite the hike in dollar prices, there is no sign of tension in the supply and demand of foreign currency, financial expert Ngo Xuan Hai said.
Vietnam currently enjoys record-high foreign exchange reserves at $63 billion. It recorded a $3.39 billion export surplus in the first five months this year and there is abundant foreign currency supply, so “there is no need to worry,” Hai said.
Echoing Hai, HSBC country head of global markets Ngo Dang Khoa said Vietnam currently has favorable conditions to keep the USD/VND rate from fluctuating too strongly, particularly with foreign direct investment disbursement reaching 13 to 14 billion USD each year and has been increasing.
“As foreign investors usually look at the long term, temporary fluctuations in exchange rate won’t affect their investment decisions” Khoa said.
The State Bank of Vietnam (SBV) can take monetary measures to stablize the economy, economist Hieu said. “With abundant foreign exchange reserves it may intervene into the market to maintain the rates,” he said, estimating that the exchange rate will increase by 1-3 percent this year.
“SBV is closely monitoring the exchange rate to take timely decisions,” SBV deputy director Nguyen Hoang Minh said.
Questions & Answers
Q.Which specific Vietnamese companies are mentioned as being negatively impacted by the rising dollar rate?
Which specific Vietnamese companies are mentioned as being negatively impacted by the rising dollar rate?
Viet Steel and Como Textile Company are both mentioned. Viet Steel imports 80% of its raw materials, while Como Textile Company imports 60% of its materials, making both vulnerable to higher dollar prices.
Q.What measures are Vietnamese import businesses considering to mitigate the impact of the dollar hike?
What measures are Vietnamese import businesses considering to mitigate the impact of the dollar hike?
Viet Steel's chairman, Do Thuy Thai, stated that company leaders are discussing increasing the prices of their steel products. This strategy aims to help them retain their profit margins despite the higher cost of imported raw materials.
Q.What economic factors suggest Vietnam may be able to manage the impact of the rising dollar rate?
What economic factors suggest Vietnam may be able to manage the impact of the rising dollar rate?
Vietnam currently holds record-high foreign exchange reserves at $63 billion and recorded a $3.39 billion export surplus in the first five months of the year. There is also an abundant supply of foreign currency.
Q.How might the State Bank of Vietnam intervene to stabilise the exchange rate?
How might the State Bank of Vietnam intervene to stabilise the exchange rate?
With its abundant foreign exchange reserves, the State Bank of Vietnam may intervene in the market. This intervention would aim to maintain stable exchange rates and manage any significant fluctuations in the USD/VND rate.
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