Companies don't have enough dollars to buy materials for the upcoming holiday season as banks claim they too don't have enough greenback to sell.
Tran Thi Hong, director of an electric appliance importer in Hanoi, said her company, which is not a loyal customer of commercial banks, could not buy foreign currencies from banks. Thus, it has to buy dollars from the black market to pay for its foreign trade partners.
Other companies say they have been able to buy dollars from banks only at rates higher than those officially announced by lenders. Hong said the extra cost came in the form of "fees" levied by the banks for the transactions.
The central bank set the dollar's exchange rate at VND20,803 on Thursday. Vietcombank was quoting a buying price of VND21,005 per dollar and a selling price of VND21,011 per dollar, the same levels as last week.
Doan Minh Dung, general director of confectionery Hai Ha Kotobuki, said his firm had purchased dollars months ago in anticipation of the demand for material imports needed for production through the Tet Lunar New Year Festival, which falls in next January.
The festival is high time for consumption in Vietnam, and Dung said he knew that buying dollars from banks would be difficult toward the end of the year.
However, his firm also could not buy all the dollars it needed at one time and instead bought the currency from different banks on several different occasions. "We have enough dollars to import materials such as sugar and milk only after amassing the foreign currency earlier," he said.
These same companies have been also hurt by higher exchange rates.
The central bank last month repeatedly raised the interbank average foreign exchange rate by up to 0.85 percent. It aims to keep rate hikes under 1 percent in the last three months of the year.
"The higher exchange rate has raised the cost of production too high," said Dao Duy Kha, deputy general director of the Vietnam Plastic Corporation. "If the situation continues, many plastic importers will face losses."
Dung of Hai Ha Kotobuki said his firm could not increase prices alongside exchange rate hikes because lower sales would surely be the result during the economic slowdown. "We have to accept lower profits in order to have customers."
Explaining the situation, the general director of a Hanoi-based commercial bank said some exporters were not keen on selling dollars to banks. As banks have to buy the greenback at high prices, they could not sell the foreign currency to importers at lower prices.
Dollar demands in Vietnam often rise in the late months of the year, as dollar loans mature, and firms need the greenback to import materials and ramp up production.
Dong under pressure
Cao Sy Kiem, former governor of the central bank, said stability of the exchange rate was crucial but difficult to attain.
"It will be difficult to keep the exchange rate between the dong and dollar stable in the coming months due to the increasing demand for the greenback needed to import materials for increasing production for upcoming Tet, and to repay loans," he said.
Tai Hui, regional head of research in Southeast Asia at Standard Chartered Bank, said in a recent report that after a period of strength between May and July, the dong has come under renewed pressure. Dollar-dong on the parallel market has again surged above the official trading band, he said.
"We believe this is partly driven by market expectations that US dollar borrowing done earlier in the year will need to be unwound, which could revive US dollar demand," he said.
Further devaluations are likely in 2012 due to a widening trade deficit, low foreign currency reserves and the risk of policy mistakes, he said.
"The Vietnamese authorities may be able to keep dollar and dong exchange rate relatively stable for the rest of 2011, but further devaluations are likely in 2012," Hui said. "Hence, we adjust our end-2011 dollar-dong forecast to 21,000 from 20,600. We maintain our 2012 forecasts of 21,400 at end of Q1"¦ and 22,000 at end-Q4."