Rising dollar makes life difficult for businesses

By Hoai Thu, Quynh Trang, Tat Dat, Anh Tu   October 25, 2022 | 11:45 pm PT
Rising dollar makes life difficult for businesses
A customer picks up an order at a Gong Cha bubble tea store. Photo by VnExpress/Tat Dat
The surge in the value of the U.S. dollar has become a big burden for Vietnamese businesses, especially those that rely on imports.

Bubble tea chain Gong Cha has been paying millions of dollars more for imports since the beginning of this year with the dong losing 8.6% so far.

The company imports 90% of its ingredients from South Korea and Taiwan, and spokesperson Tran Ngoc An said it needs to import almost every month since ingredients typically expire in 60 days.

The dollar appreciation has increased its costs by around 10%, he said.

"We cannot raise prices as it might turn customers away. We have no choice but to bear the currency exchange loss."

Many other businesses are reporting similar challenges as the Dollar Index hovers around the highest level in 20 years and threatens to dent their finances.

Vietcombank sold the greenback at VND24,882 at noon Wednesday, marking a 3.6% rise for the month. The currency has repeatedly appreciated to new highs against the dong in recent weeks.

Outbound tourism company AZA Travel, already struggling to recover from the hit it took from Covid-19, is seeing the rising exchange rate erode its profits.

"We have dozens of bookings for Thailand tours in the coming weeks, and customers are paying in dong but we have to pay our Thai partners in dollar, and so we will surely lose money on these tours," CEO Nguyen Tien Dat said.

Travel companies have a thin profit margin of 3-5%, and the dollar strength means outbound tour operators could see their margins fall to zero, he said.

The stronger dollar is also a concern for fuel importers.

The chief of a fuel importer with a large market share, who asked not be identified, said: "The rising dollar is giving us headaches. This combined with rising transportation costs is making us suffer heavy losses."

A Vietnam Airlines spokesperson said the dollar has been gaining against other currencies such as the Japanese yen, South Korean won and euro, which means the carrier has to pay more for its operations in foreign markets.

With the dollar showing no signs of cooling down, businesses are considering ways to hedge their losses.

AZA Travel is considering stocking up on dollars to hedge against further appreciation, but Dat said most tourism companies do not have enough resources to buy large amounts of dollar.

A plastic company in Ho Chi Minh City, which too asked not be identified, said it is considering raising prices though that might affect demand.

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