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Dong/dollar exchange rate likely to stay firm

VietNamNet Bridge - Businesses and analysts all believe that the State Bank (SBV) will not devalue the dong again this year because there will be less pressure on the exchange rate.
VietNamNet Bridge - Businesses and analysts all believe that the State Bank (SBV) will not devalue the dong again this year because there will be less pressure on the exchange rate.


SBV has devalued the dong by two percent this year, using up the “devaluation quota” it set earlier this year.

Do Duy Thai, general director of Viet Steel Corporation, said most the company pays for most scrap steel imports in foreign currencies. As the dollar has appreciated, the imports have also become more expensive, thus weakening the enterprise’s competitiveness in both domestic and export markets.

Nguyen Phuong Chi, director of Soi The Ky Yarn JSC, said the majority of the company’s revenues are in US dollars. The revenue is enough to pay for raw material imports and debts. Therefore, the latest exchange rate adjustment would only increase the unrealized losses on foreign-exchange differences.

When asked if he thinks the dong would depreciate further this year and break the 2 percent threshold committed by SBV, Thai said he believes this will not happen, because the government is quite capable of balancing dollar supply & demand and regulate the exchange rate. 

Thai doesn’t think the US FED will let its currency appreciate further, because this would not be good for the US economy. 

Meanwhile, Chi said the further depreciation of the dong would make the unrealized losses on the foreign-exchange differences increase and reduce profits during certain periods. However, this is not worrying because it is just the “unrealized loss”.

She said in order to minimize the effects of the unrealized loss on foreign-exchange differences in case the dong depreciates sharply, Soi The Ky may consider paying parts of its debts and boosting exports. The increased exports would help increase the dollar supply, which helps raise the realized gain on the foreign-exchange difference.

The “realized gain on foreign exchange difference” will offset the “unrealized loss on foreign exchange difference”.

The director also said she had drawn up a business plan earlier this year with the predicted 3 percent dong depreciation. Therefore, if the dong loses its value once again, the company will still be safe.

Finance experts all believe that the State Bank is not likely to continue devaluing the dong.

Ban Viet Securities believes that no more exchange rate adjustments would be made until the end of the year, because exports are expected to increase, while foreign direct investment (FDI) remains stable, and Vietnam can expect a trade surplus. 

HSBC also thinks there would be no further dong devaluation this year, predicting that the dollar price would be VND21,750 per dollar by the end of the year.



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