Enterprises expresses “peace of mind” in exchange rate waves

	There are still many challenges and difficulties in controlling inflation
	Reference exchange rate up 7 VND at week’s beginning
	USD/VND inter-bank exchange rate edges down

Enterprises need to be proactive with unpredictable movements of exchange rates. Photo: ST.

Unpredictable movements

From the beginning of the year until now, the exchange rates have maintained necessary stability. In Vietnam, the exchange rate is controlled thanks to very positive economic indicators such as stable inflation, foreign direct investment (FDI) disbursed at high levels and high trade surplus. Therefore, in the first four months of the year, the State Bank of Vietnam (SBV) has continued to buy a large amount of foreign currencies to supplement the national foreign exchange reserves, so it can be used to regulate exchange rate movements when necessary.

Therefore, many businesses expressed "peace of mind" in the domestic exchange rate movements thanks to good control of management agencies.

General Director of Lexim Co., Ltd Nguyen Thu Ha said the exchange rate policy was being operated by the State Bank flexibly and stably despite the world’s changes, so importers benefited, financial and business plans were not changed. Even though many enterprises evaluated that Vietnam regulates monetary and foreign exchange market policies very well. Many countries such as India and Turkey, the currency fluctuates up to 45%, but Vietnam is only about 0.5%, helping enterprises build stable business strategies and financial plans.

However, the movements of foreign exchange market are often unpredictable. Typically, from mid-April to now, the USD exchange rate in commercial banks has been revised up by a quite large margin. Specifically, on May 6, the central exchange rate between USD and VND was announced by the State Bank at 23,030 VND / USD, unchanged from the trading section last week, it was still at a high level. If comparing to the central exchange rate in early April, the exchange rate has reached VND 54 and rose to VND 205 compared to the beginning of 2019. This means the central exchange rate increased by nearly 1%.

Meanwhile, in commercial banks, in the middle of April and earlier, the exchange rate was quiet, even though the central exchange rate sharply increased. Typically, in Vietcombank, as of the morning of May 6, the exchange rate between VND and USD was listed at 23,235 - 23.335 VND / USD (buying - selling), up to VND 35 in both directions compared with the trading session last week. Thus, if compared to the exchange rate of 23,165 - 23,265 VND / USD (buying - selling) of many days before, the USD exchange rate at this bank increased to VND 70 in both directions, equivalent to a 0.3% increase. Therefore, many experts forecasted that the exchange rate in the remaining months of the year may increase by 1-2% compared to last year in order to balance the two goals of macro stabilisation and export support.

Must be proactive

According to enterprises, orders were usually negotiated, agreed and singed before, the increase or decrease in exchange rates impacts, even if the exchange rate increases too high, it may cause enterprises to compensate for losses. A representative of an enterprise engaging in importing and trading construction materials said exchange rate impacts enterprises depending on the type of contract and the signing time. Some contracts introduced a fixed rate, but many others stipulate the changeable exchange rate according to time of delivery, so the exchange rate increases, companies benefit and vice-versa.

In addition, enterprises are very interested in exchange rate movements because May is the beginning of the peak production season for the end of the year, the increase in exchange rate will affect import and export activities, buying and selling of raw materials for production; creating a "wave" affecting gasoline prices and logistics costs. In particular, enterprises with loans in foreign currencies are more affected when they have to increase business costs.

Therefore, in the above situation, besides flexible operation of exchange rates by State agencies, enterprises have to closely monitor the movements of the foreign currency market and seek solutions to have the initiative and avoid being influenced.

For example, using derivatives to hedge foreign-exchange risk or buying futures contracts, to ensure enterprises can buy or sell foreign currency at negotiated prices with the bank. As a result, foreign currency trading at commercial banks has increased, up to three times compared to the previous year. In addition, a representative of Thang Loi logistics joint stock company shared that in the annual financial plan, the company always sets aside a contingency expense to compensate for price fluctuations related to business activities such as: exchange rate, petroleum, human resource.

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The above problems show that businesses are more and more interested and professional in preventing exchange rate risks and reducing capital costs for foreign currency trading. However, Nguyen Thu Ha still wishes, the domestic exchange rate will remain stable in certain limits to not disturb the business activities.