Illustrative image (Photo: AFP)
Hanoi (VNA) – Experts believe fluctuations of key foreign currencies will affect import- export activities. Impacts should be limited, however, as most payments are transacted in the USD.
Never before has the world witnessed foreign currencies fall sharply against the US dollar like this year. The most volatile was the JPY that fell about 20%, followed by the EUR down 12%. Other currencies like the GBP, THB, and KRW also dropped by over 10%.
However, the VND only depreciated about 2.6% against the USD. Considering the currency basket for central exchange rate calculation, including USD, THB, EUR, CNY, SGD, JPY, KRW and TWG, the VND appreciated compared to the seven currencies.
Experts said fluctuations of some key foreign currencies will affect Vietnam’s export and import activities, especially exporters to Europe and Japan. However, trade transactions in Vietnam are mainly based on the USD, so the impact of the above foreign currencies on the overall balance of payment is not onerous.
Enterprises seek alternative solutions
The fluctuation of the exchange rate between the two major currencies, EUR and USD, is not uncommon, but any fluctuation of these two will lead to changes in investment and international trade.
A representative of a company exporting farm produce to Europe said when the EUR plunges on par with the USD, exporters will be at a disadvantage and importers at an advantage if they pay in EUR. The devaluation of the EUR will be detrimental to businesses as they collect EUR and buy domestic farm produce for processing in VND.
Tien Son-Thanh Hoa Corporation is now a strategic partner of the world’s fashion brands like Nike, Converse, Hurley, and Jordan. Each year, it exports tens of millions of products to America and Europe.
Chairman of the corporation’s Board of Directors Trinh Xuan Lam said his company’s products are mostly shipped to America while Europe accounts for only 10%, that is why it is not heavily affected when the EUR depreciates.
Meanwhile, Daikin Group, manufacturer and dealer of refrigerators in many countries, saw profits cut due to exchange rate fluctuation. Its experience is to shift the source of raw material purchase, even to shift outsourcing activities to markets with cheap local currencies.
Deputy General Director of Daikin Vietnam Ogami Noriyoshi said as the JPY is depreciating, his company is switching the production of components imported from China to Japan to avoid profit reduction. In addition, it also changed the import location or places of production to balance costs.
How to counter exchange rate fluctuations?
The State Bank of Vietnam (SBV) said it is ready to supplement foreign currency supply when necessary to stabilise the macro-economy and control inflation. Its forex reserve has amounted to nearly 110 billion USD.
Luong Thi Hoai, Head of the VPBank’s Sales of Financial Market Products, said foreign currency payments for export-import businesses are always smooth. Demand for foreign currencies this year increased by nearly 40% year-on-year thanks to economic recovery.
According to experts, the SBV’s concerted and flexible use of tools from foreign exchange reserve and attraction of the VND through the open market has exerted impact on the liquidity of VND in the system and curbed pressure on the exchange rate.
Deputy Director General of the SBV’s Monetary Policy Department Pham Chi Quang said the current 2% rise in the USD/VND exchange rate from the end of 2021 suits domestic and foreign market movements and the goal of fiscal policy management. It contributes to stabilising the currency market, macro-economy and controlling inflation.
Accordingly, the SBV will coordinate VND liquidity to support the stability of the exchange rate, foreign currency market and interest rates. In recent years, when market conditions are favourable, the central bank purchased a large amount of foreign currencies to increase reserves.
If market conditions are unfavourable, the SBV will intervene in selling foreign currencies to increase the foreign currency supply. This makes it easier for credit institutions to meet individuals and organisations’ demand, contributing to stabilising the market and fuelling economic recovery./.
