Finance

Rising dollar rate makes some happy, some sad

FRIDAY, 20/07/2018 23:37:19

Recently, the US dollar has significantly appreciated against the dong, greatly affecting production and business activities of enterprises, especially importers.



An increase in the US dollar rate has helped exporters like Manh Tuyen Private Enterprise (Binh Giang) make more profits

Rate soars

On early July 18 morning, the Hai Duong branch of the Vietnam Joint Stock Commercial Bank for Industry and Trade set the buying and selling prices of one US dollar at VND23,015 and VND23,085, respectively, a rise of over VND90 for both buying and selling compared with the early days of July.

Though not being publically quoted, VND/USD exchange rates were listed at over VND23,200/USD for selling and VND23,100/USD for buying on July 16 in the free market, up VND100 - 120/USD over the past week.

According to a representative of the Hai Duong branch of the State Bank of Vietnam (SBV), the recent surge in the USD/VND exchange rate was due to the US Federal Reserve System (Fed)'s increase of interest rates to 1.75%/ year, a rise of 0.25% compared to the beginning of 2018. That the Fed was forecast to raise interest rates at least three more times from now until the end of the year made the US dollar price hike, pushing the dong rate up.

Since early this year, the US economy has continued to thrive with more businesses returning to the country for investment and business.

The stronger the US economy is, the higher the US dollar price rises against other currencies, according to Nguyen Van Tuan, Director of the Hai Duong branch of the Joint Stock Commercial Bank for Investment and Development of Vietnam.

As forecast by financial experts, from now to the end of the year, the greenback will continue to appreciate and be stronger than other currencies. The trade war between the US and China has inconsiderably affected the value of the currency.

Sufficient foreign currency supply for businesses
 


Banks still meet the demand of people and businesses for foreign currencies

To importers, the increase in the exchange rate is not beneficial.

According to Le Xuan Hien, owner of an enterprise specializing in importing lifting machinery and equipment from the US and Italy in Lai Cach town (Cam Giang), his company has to spend more money in importing machines than before because of the surge in the US dollar price.

Previously, the firm only had to pay VND1 billion for the import of two US automatic forklifts, but now it costs up to VND1.3 billion.

"Late last year, my company contracted with domestic customers for sale of machines; therefore, it is impossible to ask they to pay more now. We have to reduce profits and even offset the difference with our own money due to the increase in the exchange rate. In the long run, we will have to renegotiate with partners to lower import costs so that the selling prices of machines in Vietnam will not increase much," said Hien.

Higher rates have also significantly influenced enterprises having to import raw and auxiliary materials for production.

Nguyen Van Hung, representative of Vietwood Co., Ltd. in Binh Giang, said though importing production materials from Germany, his company had been considerably affected by the US dollar appreciation.

The enterprise receives the dong from domestic sale but pays in US dollar, forcing it to exchange the dong for the US dollar for payment.

Fluctuations in the exchange rate will heighten input costs, forcing the enterprise to sell products at higher prices in the domestic market, which will lower the competitiveness of its products.

While importers are grimacing, exporters, especially those using domestic materials or a small proportion of materials and fuels for production, are excited.

Tang Xuan Truong, Director of Hung Viet Agricultural Products JSC. (Gia Loc), said this was good news to enterprises processing and exporting agricultural products because the amount of money earned from export would swell.

At present, the company is promoting the export of agricultural products, especially broccoli, to the US. If the greenback continues to appreciate, the enterprise will make better profits.

The appreciation of the US dollar will encourage the province-based businesses to promote export, reconsider production plans, and prioritize the use of domestic raw and auxiliary materials, thereby impulsing the development of support industries.

On the contrary, the cost price of importers' products will be greatly influenced. As the cost of production increases, sooner or later, the prices of products will rise, affecting consumers.

According to representatives of some commercial banks in the province, the banks still meet businesses' demand for foreign currencies.

Despite the increase in the exchange rate, US dollar hoarding has not occurred. The demand for the US dollar in the market remains stable with good liquidity in the system.

A great amount of foreign exchange reserves at the SBV at present will raise enterprises' capability to resist external shocks.
 
LAN ANH

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