Exchange rate remains high
While the Red Sea tensions have not yet cooled down, exchange rate fluctuations have occurred, affecting the import-export and production activities of many businesses. The USD/VND exchange rate is still high, with the USD price at commercial banks being nearly 25,000 VND/USD, causing difficulties for import-export businesses.
Mr. Pham Van Viet - General Director of Viet Thang Jean Company Limited said that for orders exported to Europe, businesses have to import up to 60% of raw materials, while for exports to the US and South Korea, this ratio is 40%. Therefore, balancing costs between import and export, businesses do not make a profit and have to pay an additional 2% on the cost price.
In fact, the exchange rate difference is compensated by foreign currency earned from exports, but the rapid increase in exchange rate causes the profit earned from exchange rate to decrease.
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| Import-export businesses under pressure from exchange rate fluctuations |
Ms. Lam Thuy Ai - Chairwoman of the Board of Directors of Mebipha Company said that every year the company has to spend millions of USD to import raw materials for production. "When the exchange rate increases, it immediately affects the production and business activities of the unit", Ms. Ai informed.
Regarding the story of exchange rate fluctuations, economic expert Associate Professor Dr. Dinh Trong Thinh said that the exchange rate increased because in the first quarter, foreign currency demand for import and export activities increased, along with the impact of the strong increase in gold prices, causing people to switch to buying USD.
In principle, the recent exchange rate fluctuations will increase the import price of raw materials for production for import enterprises transacting in USD; while export enterprises will benefit because their revenue converted to VND will increase.
However, if the exchange rate story continues to be maintained or anchored high, businesses will be more strongly affected because many products produced for domestic consumption also have to import raw materials from abroad. These factors will reduce business profits in the long run.
Proactive risk prevention
According to forecasts by international experts and organizations, the USD/VND exchange rate will cool down and decrease to 23,600 VND/USD in the third quarter and 23,500 VND/USD in the fourth quarter of 2024.
Ms. Hoang Thi Lien - President of the Vietnam Pepper and Spice Association said that, with regard to exchange rate fluctuations, businesses need to be careful when signing contracts. At the same time, they need to be more proactive in balancing payment currencies, adjusting plans and choosing more diverse import and export markets, and should not be too dependent on payment in USD.
According to economic expert Dr. Dinh The Hien, to avoid impacts related to strong exchange rate fluctuations, import-export enterprises need to do a better job of forecasting as well as participating in tools for hedging exchange rate risks.
If businesses are more proactive in using derivative financial instruments, while screening the market and diversifying payment currencies, there will be more opportunities to minimize risks and even benefit from currency price differences.
In addition, businesses can also choose exchange rate risk management measures such as choosing banks with attractive trade finance policies, using financial instruments for buying and selling foreign currencies with terms, swap contracts, etc. This helps businesses minimize exchange rate risks when conducting import and export transactions in the context of exchange rate fluctuations, and can be proactive in their financial plans.
For import businesses, Mr. Hien recommends that businesses need to diversify their supply sources and find domestic importers to help reduce dependence on one market, thereby reducing risks when exchange rates increase rapidly.
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