A bank teller counts the dollar at a transaction office in Hanoi (Photo: VNA)The exchange rate between the Vietnamese dong and the US dollar at bankshas recently increased sharply. On April 3, the dollar price surpassed the 25,000VND threshold. Vietcombank listed the dollar at 24,750 VND for buying and 25,120VND for selling. The rates at VietinBank and BIDV were VND24,720 and 25,140 VND,and 24,815 VND and 25,125 VND, respectively.
According to Dao Phan Long, a representative of the VietnamAssociation of Mechanical Industries (VAMI), enterprises which have to importraw materials for production or have dollar-denominated loans are very worriedas their input costs will increase significantly.
Nguyen Van Doan, deputy director of SKD Vietnam Precision Mechanical Company,said though the exchange rate increase was predicted, it certainly had animpact on enterprises. Despite being a small-sized company with a modest importvalue, his company had to spend an additional hundreds of millions of dong forimporting raw materials to date this year due to the rate hike. The rise wasreally a big concern for large-sized companies that have to spend thousands ofbillions dong on importing raw materials.
If the exchange rate fluctuations are not controlled and continueto increase sharply in the middle and end of the year, enterprises will faceeven more difficulties as their demand for imported raw materials andaccessories to serve for production always increase then, according to Doan.The surge will reduce enterprises’ profits.
According to Than Duc Viet, general director of the Garment No.10 Corporation,continuous and sharp exchange rate increase has caused his corporation, whosetextile and garment products are exported to more than 10 markets around theworld, to face difficulties in production and business.
Viet explained that although an increase in the USD/VND exchange rate couldhelp garment producers increase export value, they also had to spend much moremoney to import equipment, machinery and raw materials.
Besides, in the context that consumer demand had not really recovered strongly,the increase in exchange rates also caused goods sold in the European andAmerican markets to have higher prices, which led to lower consumption, Vietsaid.
Finance expert Dr. Can Van Luc attributed the exchange rate increase to thereason that the beginning of the year was the time when some FDI enterprisesrepatriated profits to their home countries. This was a seasonal factor and hadthe effect of increasing the demand for dollar trading.
Besides, the exchange rate increase was also due to a rise in speculation whenthe exchange rate fluctuates, Luc said.
Experts admit the exchange rate is being flexibly managed and kept stable bythe State Bank of Vietnam. The devaluation rate of the dong against thedollar is still lower than that of other countries. The VND/USD exchange ratehas so far this year increased by only 2.6%.
However, the experts note, if the dollar continues to strengthen compared tothe dong, it may create the risk of import inflation. They explained mostof Việt Nam's exports currently have high import value content. At the sametime, many products which are consumed in the domestic market also have toimport raw materials for production from abroad. This will reduce profits ofenterprises in the long run.
However, according to Lực, the recent increase in exchange rates is not tooworrying, because the appreciation of the dollar will slow, or even decrease,when the US Federal Reserve (Fed) cuts interest rates and the US economy beginsto be affected by the impact of high interest rates.
The SBV has said it will continue to closely monitor the market situation tomanage exchange rates flexibly and appropriately. It will be also ready tointervene in the market when necessary to stabilise the foreign exchangemarket, contributing to inflation control and macroeconomic stability./.
VNA
