The Dollar’s Downfall: A Business Relief

On August 26, the State Bank of Vietnam set the daily reference exchange rate at 24,254 VND/USD. In the interbank market, Vietcombank quoted the dollar at 24,680 VND (buying) and 25,050 VND (selling), down 100 VND from the previous week. BIDV also lowered its USD buying and selling rates to 24,730-25,070 VND. In the black market, the greenback was traded at around 25,200-25,300 VND, the lowest level so far this year. The free fall of the USD in the black market has been observed over the past month, especially in the first half of August. Compared to the peak of nearly 26,000 VND at the end of June, the black-market dollar rate is now down by about 700 VND, or 2.4%.

According to a report by the State Bank of Vietnam, the Vietnamese dong had depreciated by nearly 5% against the USD since the beginning of 2024. However, by early August, the rate had slowed to 3.85%. Sharing his view with Tien Phong newspaper, expert Nguyen Quang Huy, CEO of Finance and Banking, Nguyen Trai University, said that the plunge in the USD rate in Vietnam took place amid signs of weakening of the greenback in the international market as the US Federal Reserve (Fed) has signaled a clear intention to loosen monetary policy.

Mr. Huy added that the rapid cooling down of the exchange rate will create favorable conditions for the State Bank of Vietnam to loosen monetary policy to support liquidity for the banking system and the economy. Previously, in the second quarter and the first half of the third quarter, the State Bank of Vietnam had to continuously implement tightening measures in the market to curb the rising exchange rate, such as increasing the OMO interest rate (the interest rate in open market operations), issuing bills, and selling foreign currencies…

Businesses breathe a sigh of relief

While the exchange rate was a hot topic for investors and authorities in the first half of 2024, the issue has now cooled down. The pressures that could push up the exchange rate have gradually decreased, including both internal and external factors. According to experts, the stability and downward trend of the exchange rate in the coming time bring many positive prospects for businesses, especially those with USD loans and import needs.

Mr. Nguyen Cong Hung, director of a company importing leather from abroad for domestic production, said that his company needs to import VND 15 billion worth of goods every month, with all transactions made in foreign currency. Thanks to the recent decline in the exchange rate, the cost of each order has decreased by 2-4% compared to the peak.

“At present, the USD price has dropped, leading to lower production input costs for businesses. As a result, the selling price of output products is cheaper, helping enterprises increase revenue,” said Mr. Hung.

Sharing the same view, Mr. Nguyen Duc Do, Deputy Director of the Institute of Finance and Banking, Finance Academy, said that the decrease in the exchange rate will help reduce pressure on businesses with foreign currency loans. At the same time, the State Bank of Vietnam can expand the money supply and lower the operating interest rate, thereby keeping the interest rate stable and creating favorable conditions for businesses to develop. Mr. Do believed that the exchange rate from now to the end of the year is likely to continue to cool down if the Fed cuts interest rates. However, the USD rate will not fall below 25,000 VND.