USD exchange rate skyrockets: Businesses struggle with cost surges

The continuous surge in exchange rates recently has compelled businesses to seek ways to adapt. Many enterprises have had to allocate hundreds of millions, even billions, of VND to cover import costs.

Price Increases and Additional Expenses Due to Exchange Rate Fluctuations

Speaking to Tiền Phong, Mr. Vũ Duy Hải, CEO of Vinacam Group JSC, stated that the company spends over $100 million annually on fertilizer imports. Consequently, any fluctuations in exchange rates significantly impact its business operations. In the first two months of this year alone, Vinacam imported nearly $20 million worth of goods. A mere 2% increase in the exchange rate translates to an additional expense of approximately $40,000, equivalent to nearly VND 1 billion, in input costs.

“For import-focused businesses like Vinacam, any rise in exchange rates is a major concern as it inflates product costs, subsequently driving up domestic selling prices and affecting consumption. Even a few percentage points of exchange rate fluctuation within a year could result in millions of dollars in additional expenses due to foreign exchange differences,” Mr. Hải noted.

A representative of Nam Hà Garment JSC pointed out that, while a rising exchange rate does generate additional revenue when converting export earnings into VND, most businesses still have to make payments in USD for imported equipment, machinery, and raw materials such as cotton, fabric, and yarn. As a result, the gains from exchange rate differentials are insufficient to offset increased import costs.

“At the beginning of the year, we ramped up imports of raw materials to meet production needs. The exchange rate hike forced us to allocate an additional VND 500 million to cover the depreciation of the VND. Under normal circumstances, this amount could have been used to pay a portion of workers' wages and utility bills,” the representative said.

The CEO of a livestock feed company revealed that rising exchange rates have compelled the company to adjust selling prices. Each shipment is typically valued at several million USD, so the exchange rate hike has added costs in the billions of VND.

Over the past few days, poultry feed prices have surged compared to early 2025. Specifically, the price of native chicken feed with 18% protein content has risen to VND 27,000 – 28,000/kg, marking an increase of VND 4,000 – 5,000/kg. Meanwhile, industrial chicken feed with 12% protein content is now priced at VND 25,000 – 26,000/kg, up by VND 5,000 – 6,000/kg.

“Vietnam spends nearly $8 billion annually on livestock feed imports. With exchange rates projected to increase by 5-7% this year, companies in the sector may have to bear an additional $400 – $560 million in foreign exchange losses. If the exchange rate rises sharply in mid-to-late 2025, businesses will have no choice but to continue raising prices, directly impacting consumers and reducing corporate profitability,” the executive explained.

Market data also indicates that many publicly listed enterprises have substantial foreign currency debt exposure. For instance, Power Generation Corporation 3 (EVNGENCO3) currently holds more than VND 40.48 trillion in outstanding loans, predominantly in USD at floating Libor rates (London Interbank Offered Rate). Last year alone, the company incurred VND 1.34 trillion in foreign exchange losses. Similarly, PetroVietnam Power Corporation (PV Power) faces significant pressure, with outstanding loans exceeding VND 46.6 trillion. The company recently secured a $500 million loan to finance the Nhơn Trạch 3 and 4 power plant projects.

Mitigating Negative Impacts

Mr. Tô Hoài Nam, Vice Chairman and General Secretary of the Vietnam Association of Small and Medium Enterprises, emphasized that while businesses cannot control exchange rate movements, they must remain vigilant and flexible to mitigate adverse effects.

To navigate these challenges, Mr. Nam suggested that businesses closely monitor exchange rate trends and promptly adjust business plans. Strategic considerations should include selecting optimal import-export markets, utilizing alternative payment currencies, and gradually reducing dependence on USD transactions. Additionally, firms could explore shifting their export focus to major markets such as Japan and China while employing hedging mechanisms to minimize unexpected impacts on profitability.

As of March 26, the State Bank of Vietnam (SBV) announced a central exchange rate of VND 24,847/USD, up 16 VND from the beginning of the week. With a 5% trading band, commercial banks are permitted to trade USD within the range of VND 23,605 – 26,089, marking a record high. Compared to the beginning of the year, the exchange rate has already risen by over 2%.

According to Rồng Việt Securities (VDSC), the surge in exchange rates in 2025 stems from multiple factors, including U.S. President Donald Trump’s tariff hikes on imports, which are impacting global trade and exerting pressure on exchange rates. Additionally, the sluggish recovery of the global economy, coupled with rising inflation in the U.S., has prompted the Federal Reserve (Fed) to maintain high interest rates, thereby strengthening the USD against other currencies.

In this context, despite Vietnam maintaining a trade surplus, a slowdown in foreign direct investment (FDI) inflows and remittances could reduce foreign currency supply, further pressuring exchange rates.

Given these complex dynamics, VDSC forecasts that the exchange rate could reach VND 26,200/USD by the end of 2025, representing an approximate 7% increase from the beginning of the year.

State Treasury Acquires Over $1.1 Billion

On March 19, the State Treasury of Vietnam announced its intention to purchase up to $300 million from commercial banks through spot transactions, with the transaction date set for March 20 and settlement on March 24.

Over the past month, the State Treasury has conducted five rounds of foreign currency purchases from commercial banks, totaling over $1.1 billion. This move—primarily aimed at servicing foreign debt—has further fueled the appreciation of the USD, sustaining upward pressure on exchange rates.

Source

(According to 24hMoney)