It needs to pay attention as the exchange rate ripples

Being active to deal with the exchange rate fluctuations is the concern of import-export enterprises. Photo: ST.

There will be fluctuations

After the stability of 2017, right from the beginning of 2018 the exchange rate has fluctuated, despite the control of the State Bank (SBV). By the end of May 2018, the exchange rate again continued to have many sessions where it increased sharply. This is due to the pressure from the economic situation in the country and the world. Specifically, in the domestic market, inflation tends to increase, the demand for loans in foreign currency is still high, and the trade balance in May has a deficit of $US 500 million after 4 consecutive months of trade surplus. In the world market, the pressure to raise interest rates due to the US is still raising many concerns about trade disputes when political changes made the dollar price increase more than other currencies.

Because of these reasons, in the trading session on June 4, the exchange rates at commercial banks were listed around 22,760-22,850 VND/ USD (buy - sell), increasing sharply by 100 VND in the two-way transaction compared to the beginning of 2018, equivalent to an increase of about 0.4%. As a result, experts say the exchange rates in 2018 may rise by 1-3%, but many "unknown factors" from the economic situation may move this number up or down, no one can predict.

Although the exchange rate fluctuates, the positive point is still in control, thanks to the commitment to synchronously implement monetary policy measures and instruments to stabilize the foreign exchange market and the exchange rate in the margin under the permission of the SBV, with foreign reserves reaching about $US 64 billion. But businesses should not be subjective because in the second half of the year, the demand for payment in foreign currency will increase when regular orders are paid in the middle of the year and the end of the year; In addition, the US Federal Reserve (FED) is still open to the possibility of raising interest rates, which makes the belief of the dollar increasing.

Take active prevention

With the above developments, the initiative to calculate and find solutions to prevent risks is what the import-export enterprises should pay attention to and implement. However, many businesses are quite subjective to say that the exchange rate increase in the second half of the year is cyclical and regular, still within the permissible range, thus we should not worry.

Mr. Pham Xuan Pha, Director of Phuong Thanh Trading Production Import Export Co., Ltd, a company specializing in export of handicrafts and fine art products said that, as being an export enterprise, the high exchange rate creates many opportunities and benefits for businesses. However, if the exchange rate fluctuates in a downward direction, according to Mr. Pha, his company will negotiate prices with its partners, because they have traded for years, creating a reputation so it will be accepted.

With another measure, Mr. Ngo Minh Hai, Deputy Director of Thang Loi Logistics Joint Stock Company, said that in the financial plan from the beginning of the year, his company will put aside funds for the provision for risks relating to expenses gas, oil, labor, etc., to compensate for losses when prices rise or fall sharply. Therefore, with these methods, the company has not used the measures to prevent exchange rates provided by banks.

These are the situations of many enterprises before the exchange rate fluctuations, although banks now offer more services of exchange rate insurance, and exchange rate derivatives help businesses be more active. Accordingly, enterprises can use exchange rate insurance services by futures contract; that means if the exchange rate fluctuates from the middle of the year, enterprises will be less affected by the exchange rate in the future. In this way, enterprises may be subject to higher rates than the current, pay additional fees for banks, but are guaranteed stability, without affecting the long-term financial plan.

Clearly, the practice shows that the use of professional preventive measures will be more effective, especially for businesses that are borrowing in US dollars, borrowing by floating interest rate, the cost of capital will increase to the corresponding number. A company shared, the average annual cost of using the tools of prevention by enterprises is about 100 million VND. This is not a small number of enterprises, especially small and medium enterprises, so the tools to prevent exchange rate risk are still far from many companies. Thus, the only way is self-management.

However, it is not because of the cost reasons that businesses are subject, especially when the exchange rate fluctuations are increasingly unpredictable, that can put pressure on the competitiveness and the situation of production, business of enterprises at anytime. Therefore, the profit considerations to use professional preventive tools will help businesses be more secure, as well as avoid affecting the business market in general.