Exporters urged to minimize headwinds from currency volatility

VIETNAM, August 22 –

HÀ NỘI — Since the global commodity and foreign exchange markets experience many fluctuations, domestic exporters should pay attention to the exchange rate among Vietnamese đồng and other currencies to allow them to choose the most profitable ex-import markets and payment currencies.

Phan Minh Hòa, an economics professor at RMIT University, recommended the measures as local businesses have begun to suffer headwinds from the sharp swings in the US dollar, euro and Japanese. yen on their production and commercial performance.

The dollar has strengthened strongly this year against the euro and the Japanese yen, as the US Federal Reserve has raised interest rates to curb inflation that has been high for 40 years.

While the euro dipped below parity with the dollar last month – a 20-year low, the yen also hit its lowest level against the dollar in 24 years in June 2022.

The Vietnamese đồng has so far depreciated around 2% against the dollar and is expected to depreciate below 3% in 2022, according to VNDirect Securities Company.

“In theory, US dollar appreciation can increase export earnings, and exporters can benefit when converted into đồngbut in fact, exporters also have to pay higher costs for imported materials as well as logistics and warehousing fees,” financial and banking experts Cấn Văn Lực said. News from Việt Nam.

“Export prices only increased by 9% on average, while import prices increased by 11%,” Lực explained, adding that many importers of Vietnamese products have asked Vietnamese exporters to reduce their prices.

In addition, as most currencies, including the yen and the euro, have weakened considerably against the dollar, the demand for import goods from the Japanese and European markets has decreased, negatively affecting Vietnamese exports, according to Lực.

Kim Thu, a representative of the Vietnam Association of Seafood Exporters and Producers, said the sharp depreciation of the Japanese yen against the US dollar had prompted Japanese importers to suggest renegotiating import prices to compensate. their losses when the yen weakened.

In addition, some Japanese importers, who have already signed import contracts, asked to negotiate to receive the goods more slowly by three to five months to wait for consumers to get used to the new prices.

Due to heavy losses when the local currency depreciates, Japanese importers would adjust their import plans and demands, Thu said.

According to Thu, although Vietnamese exporters were not too affected by the depreciation of the yen and the euro because most of their import and export transactions were in US dollars, they were affected by the decline in import demand as importers’ profits declined.

Moreover, when the yen and the euro weaken, imported goods become more expensive. At that time, Japanese and European consumers chose essential items at affordable prices, which reduced consumer demands.

Võ Văn Phúc, general manager of Vietnam Clean Seafood Joint Stock Company, said consumer purchasing power has declined significantly and seafood exports have been struggling since August 2022.

Besides choosing old import markets and payment currencies, Hòa said, to hedge against exchange rate risks, local businesses should choose banks with good trade finance capacity and use financial instruments. derivatives such as currency futures and swaps.

In the long term, companies would need to increase the competitiveness of exported goods and make a difference in their products.

Exporters, which currently use many imported material companies, should look for alternative material resources, especially domestic ones, to gradually reduce dependence on imports, Hòa suggested.

In addition, Hòa said, policymakers must also ensure a balance between economic growth goals and inflation control.

He explained if the đồng depreciated too quickly, the cost of importing raw materials and inflation would increase and affect production. In addition, there was an increase in the external debt burden or the risk of being considered by the United States for currency manipulation.

On the contrary, if the exchange rate were too tight, while the currencies of other countries depreciated, export goods would also lose their competitiveness, Hòa said. —VNS

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