The weakening of the Vietnamese dong against the dollar, coupled with soaring shipping expenses due to ongoing tensions in the Red Sea, has significantly raised operational costs for both exporters and importers.
Presently, the U.S. dollar stands at VND25,350-25,590, marking a 1.9% increase since the year’s onset and an 8% surge compared to six months prior. This uptick in the exchange rate has instilled apprehension among many importers, foreseeing substantial losses.
The director of a seafood importing firm in HCMC approximated that each US$100,000 purchase now entails an additional VND70-100 million in expenses compared to the contract signing. He also underscored the potential inflationary impact of the dong’s depreciation against the dollar, which could erode consumer purchasing power, further complicating matters for importers.
While the strengthened dollar has bolstered revenues for exporters, those reliant on imported inputs for production are grappling with escalating expenditures.
Steel manufacturers, predominantly dependent on imported raw materials, anticipate compounded challenges amidst subdued domestic demand and dwindling export figures, as per a spokesperson from the Vietnam Steel Association (VSA).
Cashew exporters have also felt the repercussions, albeit to a lesser degree, given that most orders are fulfilled within a brief five to seven-day window, noted Tran Huu Hau, deputy general secretary of the Vietnam Cashew Association.
An executive from the Vietnam Logistics Association highlighted that the dong’s depreciation against the dollar, coupled with tensions in the Red Sea, has led to a twofold or even threefold surge in shipping rates from Vietnam to Europe and the U.S. East Coast.
In efforts to mitigate losses stemming from currency fluctuations, financial derivatives like currency hedging should be considered by businesses, recommended finance and banking analyst Nguyen Tri Hieu.