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Vietnam's businesses face dollar headwinds
The Vietnamese dong-U.S. dollar exchange rate has trended up following a recent jump in the value of the greenback, especially on the black market, plunging Vietnamese firms into turmoil.
The U.S. dollar-Vietnamese dong exchange rate jumps, piling pressure on firms in Vietnam. Photo: Tuoi Tre
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In mid-February, the dong-dollar exchange rate exceeded VND25,000 to the dollar, while the rate has been fluctuating between VND25,600 and VND25,700 a dollar.
Nguyen Duc Cuong, chairman of a component production company in Bac Giang Province, northern Vietnam, voiced his concern over the hike in the exchange rate.
He said that his firm would have to stockpile the dollar to minimize losses.
“Export enterprises generate earnings in the U.S. dollar, and exchange it for the dong, while making payments in foreign currency," he elaborated.
“The dollar-dong exchange rates cost firms a lot of money."
Storing the greenback is a method to struggle with the spike in the exchange rate, but firms which face a lack of the Vietnamese dong for payments must opt to sell U.S. dollars, Cuong noted.
The increased value of the dollar has caused losses to many small importers.
Vu Duy Hai, general director of Vinacam Group JSC, said that the forex rate hike is giving firms a headache.
Hai stated that the exorbitant value of the U.S. dollar in the underground market will intensify the burden on businesses, particularly small enterprises.
Though the dollar on the global market is kept stable, the dong-dollar exchange rate on the black market has surged, showing a strong demand for the foreign currency on the free market.
Hai saw the forex rate jump as a benefit for exporters as they can exchange the dollar for the dong at a high price on the black market.
Local exporters can resort to the stronger dollar to enhance their outbound shipments rather than imports.
However, Nguyen Ngoc Luan, director of Global Trading Connection Company Limited, lamented that despite its exports, his company unavoidably imported goods for production, making it hard to gain profits.
The gap between dollar supply and demand for economic development is not that wide, said Tran Ngoc Bau, general director of WiGroup Corporation.
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| Employees process cashew nuts in Khanh Hoa Province, south-central Vietnam. The U.S. dollar-dong exchange rate hike is challenging cashew processing firms in Vietnam. Photo: Nguyen Tri / Tuoi Tre |
Statistics from the General Statistics Office of Vietnam indicate that the country enjoyed a trade surplus of US$4.72 billion in the first two months of 2024.
Meanwhile, the U.S. Dollar Index is seen weakening against major currencies such as the British pound, euro, Swiss franc, Japanese yen, Canadian dollar, and Swedish krona.
Many local experts said that the increase in the dollar value on the black market was similar to the fluctuation of gold prices.
Certain local business representatives have suggested implementing stricter controls on the circulation of the U.S. dollar.
This measure aims to prevent a significant influx of U.S. dollars from banks into the black market, thereby safeguarding the equilibrium of dollar supply and demand in the local market.
Multiple industries in trouble
Nguyen Dang Hien, general director of Tan Quang Minh Manufacture and Trading Co. Ltd., said that the beverage industry is facing several challenges, including the forex rate hike.
The firm is importing some drinks, ingredients and plastic beads, and making payments in the U.S. dollar, thereby pushing up its production cost by three or four percent.
However, the consumption of its products is weakening, so the sale prices have not been adjusted up for several months.
“To reduce the loss caused by the forex rate spike, we are seeking material sources in the local market instead of our imports, while trying to foster our overseas shipments,” Hien said.
Bach Khanh Nhut, vice-chairman of the Vietnam Cashew Association, said that local importers are making payments for 2.8 million metric tons of cashews annually in the U.S. dollar, heightening the burden on them.
Tuoi Tre News
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