Bank of Thailand to Take Further Steps to Reign in Thai Baht

Thailand’s central bank has reported that is ready to take additional steps to rein in the skyrocketing Thai baht.

The Bank of Thailand and the government remain concerned about the baht’s appreciation and continue to discuss the issue, Deputy Governor Mathee Supapongse said told reporters in Bangkok Tuesday.

The bank’s foreign-exchange intervention has helped to boost reserves and curb the baht, Bloomberg reports.

The Bank of Thailand has taken several steps in recent months to limit gains in the baht. Especially after it surged almost 9% against the dollar in 2019, the best performer among Asian currencies. The strong currency has hurt the nation’s exports, prompting calls for further action from the government.

Mathee said it’s not the central bank’s job alone to manage the baht
“The central bank is like the last door to defend the baht,” he said. “The first door is the private sector and the second door is the government. We all need to help out.”

If the central bank is left to solve the baht problem on its own, “they will need to use strong medicine to handle it,” said Mathee. “And it may not benefit much. If all parties help, they can use milder measures which will benefit all parties.”

He added the central bank will take action if it sees currency speculation. Separately, the bank published a foreign-exchange code of conduct on its website, outlining ethical and governance practices for market participants.

BOT Governor Veerathai Says Thailand To Ease Capital Outflow Rules Again
Governor Veerathai Santiprabhob said last week the central bank will relax restrictions on capital outflows again, in an effort to ease upward pressure on the baht. Those steps includes boosting the amount of proceeds exporters can hold overseas to $1 million.

Finance Minister Uttama Savanayana said Monday any steps authorities take to curb gains in the currency won’t disrupt the “market mechanism” of the baht.

Some of the steps already taken by the central bank include:

Interest rates cut twice last year to match a record-low 1.25%
In July, measures were imposed to counter short-term inflows
In November, rules on capital outflows relaxed

The government also plans to issue measures to boost imports on capital goods and machinery for investment to help reduce pressure on the baht.

Source - Chiang Rai Times

Thailand’s Prime Minister Orders Quick Action on Thai Baht

Thailand’s Prime Minister Prayut Chan-o-cha has ordered authorities to immediately stabilize the baht value and control its rise. He also ordered the Finance Ministry to form a new committee for the task.

Finance Minister Uttama Savanayana said Gen Prayut made the order as baht appreciation was affecting exporters. Many groups of operators in exports and tourism has pressured the PM over the soaring baht.

There will not be any order for a particular direction of the baht value, Mr Uttama said. That is the responsibility of the Bank of Thailand. The new committee idea will be proposed to a meeting of economic ministers. It will be a forum for organizations to exchange information,” he said.

The Finance Ministry will form the baht stabilization committee together with the Bank of Thailand; the National Economic and Social Development Council; the Office of the Insurance Commission; and the Stock Exchange of Thailand.

The Finance Ministry also plans to set up another committee to implement national strategies. Concerning small and medium-sized enterprises, start-ups and the grassroots economy. Furthermore so that the strategies would significantly boost the economy.
Central Bank Trying to Curb Baht

Thailand is trying to coax the baht down from six-year high territory as the currency’s strength threatens local manufacturing and tourism.

The central bank has cut interest rates and eased capital controls to rein in emerging Asia’s best-performing currency this year.

It is an ironic twist for a country that became the epicenter of the 1997 Asian financial crisis after its currency collapsed. Thailand now finds that its relatively sound fundamentals have made it a safe haven for capital in Southeast Asia.

The bank cut its benchmark one-day repurchase rate to 1.25%, tying an all-time low, while also making it easier to take funds out of the country.

Source - Chiang Rai Times
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Somkid urges BOT (Bank of Thailand) action on baht

THE government’s economics chief has voiced his concerns over a strong baht with his central bank counterpart, citing the impact on farmers and calling on him to be ready to put the brakes on further gains in the currency.

Deputy Prime Minister Somkid Jatusripitak yesterday said the government was worried that a chain reaction would set in as farmers across the country struggled with burden of an appreciating currency.

Somkid said he had aired these concerns with Bank of Thailand (BOT) governor Veerathai Santiprabhob and asked him to ensure that the baht won’t be allowed to rise too rapidly.

 “The governor understands the issue but the central bank cannot quickly bring the value of the baht down due to the many influencing factors,” Somkid said of his talks with Veerathai. Somkid said the central bank’s stance is understandable and that the government cannot intervene in the policymaking of the BOT.

Somkid’s comments follow a meeting he held with senior officials from the many ministries that are formulating economic policies aimed at helping low-income earners. Officials raised the issue of the impact of the appreciating baht on farmers, which makes their commodities less competitive on the global markets.

Somkid said the government plans to set aside Bt12 billion for fiscal 2020 on economic policies that benefit the poor.

 In a separate news conference, Veerathai vowed he would take action on the baht’s strength and has called for other parties to coordinate in actions to remedy its impacts.

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He defended the central bank’s actions in raising the policy rate in December, to 1.75 per cent. Veerathai said the move did not cause to the baht to rise against the US dollar, not did it encourage capital inflows.

This year, capital outflows from the bond market are at US$400million, while inflows into the stock market are just US$100 million, resulting in net outflows of $300 million, he said.

The weaker dollar, combined with the high current account surplus, has contributed to the baht’s rise, he said.

He expressed his concern that a less resilient economy would encounter difficulties with exchange rate volatility.

The currencies of some countries have experienced higher volatility than the baht but their economies are coping with it better than the Thai economy, Veerathai said.

He said that some experts may want the baht fixed at 31,32 or 33 to the dollar but the exchange rate cannot be fixed due to the many external factors that are beyond Thailand’s control.

“The most important is how to make sure the economy can absorb the exchange rate volatility,” he said.

This means that the competitiveness of Thai firms largely depends on pricing, he said in respond to exporters who have complained about the impact of the baht appreciation. 

Importers have been prudent as they have use financial tools to hedge against the risk stemming from exchange rate volatility, but exporters have not yet hedged against such risks on regular basis, Veerathai said.

He promised to make the forwards market more transparent and competitive in order to help businesses to cut hedging costs. Banks‘ clients do not understand how banks run the forwards market and are unclear on the competitiveness of this market, he said.

Veerathai encouraged exporters and importers to rely more on local currencies rather the US dollar.

Thailand’s exports to the US represent 10 per cent of the total, but they quote prices in US dollar on up to 70 per cent of total exports, he said.

He advises businesses to quote their product prices in yuan , yen, ringgit and other currencies of the country’s trading partners.

Thailand should also take advantage of the stronger baht to import capital goods for domestic investments, he said, referring to the relatively weak investment as the major cause of the current account surplus.

Thailand had a relatively high current account surplus of US$37 billion last year, due to surpluses in goods exports and income from tourism.

According to the central bank, the baht has risen 3.93 per cent against the US dollar, hovering above Bt31 since the beginning of the year.

“The rise of the baht is in the middle of the group among currencies of emerging economies. For example, the Russian rouble and the Indonesian rupiah have risen much more rapidly,” Veerathai said,

Source - TheNation