Business concerns as US dollar rate surges

The increasing value of the US dollar has heightened the cost of imported materials for many enterprises. Businesses are looking at potential developments.

Half of materials used by this enterprise are imported, and cost nearly a million US dollars per month. Every change in exchange rate greatly affects the cost of production. Many firms anticipate a worsening scenario after recent changes in the exchange rate.

“We import nearly a million US dollars of materials each month, the exchange rate fluctuation has costsus an additional 26,000 US dollars We can't just raise our product prices following an increase in input material costs. We need to figure out ways to stay competitive”, said Le Duy Anh - General Director of Xuan Hoa Furniture Company.

The year-end is always the most important time of the year in terms of foreign currency demand. The US dollar/ Vietnamese dong exchange rate has surged from the second half of November, by about 1.5%. However, the change is still much lower than the devaluation experienced with other key currencies. After the US presidential election, the Yen's value decreased by upto 11%, and the value of Euro and Yuan dropped by about 6% compared to the US dollar.

“I think we need to look at the big picture. Not only in Vietnam but also globally, where countries have to deal with fluctuating exchange rates following Brexit and the US presidential election. The Vietnamese dong exchange rate also experienced changes in the past fortnight. However, the impact on Vietnam is much less than other countries”, said Pham Hong Hai - General Director of HSBC Bank.

According to experts, exchange rates will continue to face pressure from a potential increase in interest rates by the US Federal Reserve, the US's new economic policy and exchange rate changes by central banks in other countries. The increase in the US dollar/ Vietnamese dong will be around 2% this year.

“There's isn't really a problem with supply and demand in terms of foreign currency. Our trade surplus in the first 11 months reached 2.84 billion US dollars. FDI disbursement this year increased by 8.3% year-on-year. The number of international tourists also rose by 25%”, said Can Van Luc - Economic Banking expert.

Firms have recently benefited from extended repayment periods of foreign currency loans until the end of 2017, this will hopefully mitigate the pressure on repayments in US dollars at the end of this year.