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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#Thailand - ‘Overshooting’ Thai Baht raises fears of sluggish growth

WITH THE stronger baht constraining Thai economic growth, other small emerging market economies are facing the risk of recession, economists warn.

Teerana Bhongmakapat, former dean of economics at Chulalongkorn University, expressed concern about the baht’s rise against the US dollar and regional currencies. “The overshooting baht doesn’t align with economic fundamentals and could hurt growth,” he told The Nation. 

With Bt31 now worth $1, Thai exporters fret it will render their products less competitive on the global market. The average exchange rate on Friday was Bt31.347 per dollar, down from Bt32.351 on January 2, according to the Bank of Thailand.

Teerana said a combined central-bank rate hike in December and foreign investors’ positive sentiment have contributed to the baht’s rise in value relatively to the dollar and other Asian currencies. Meanwhile economic fundamentals are not keeping pace, he said. Economic growth is expected to be less than 4 per cent this year.

Current growth is sluggish while private investment remains weak, with capacity utilisation ranging from 60-68 per cent, Teerana noted. Exports are expected to slow due to global economic deceleration.

With Thailand so economically reliant on tourism, he warned, any global factors that have an adverse effect on foreigners’ travels would badly hurt here.

Many analysts are worried about the US and China entering recessions in the next few years, but Teerana believes the world’s largest economies are unlikely to face either a recession or a growth contraction in two consecutive quarters. 

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Rather, they’re likely to have slower growth, he said. 

The US has a large and sound services sector and China has embraced a high-technology value chain in the wake of its manufacturing slowdown, he said.

However, small economies have a higher risk of falling into recession, especially those being targeted for US economic sanctions, such as Turkey and Venezuela, Teerana said.

The slowing of global growth could also adversely disrupt Thailand’s production chain, he advised.

Teerana opposed the central bank’s previous rate hike, noting that the Thai economy has remained in a lower “growth trap” and inflation is quite low. 

He did not accept the central bank’s argument that the current 1.75 per cent policy interest rate could still accommodate economic growth. 

“Look at the US – the world’s largest economy – which has had high growth and low interest, ranging from 2.25 to 2.5 per cent,” said Teerana. “The interest rate market is expecting that most other countries will be cutting rates within one year, with the exception of Thailand,” noted Kobsidthi Silpachai, head of capital markets research at Kasikornbank. 

So the upcoming meeting of the Bank of Thailand’s monetary policy committee (MPC) is critical, he said.

If the MPC continues to flag concerns about policy space and search for yield, market expectations that the Thai interest rate is on the way up – even as neighbouring countries are lowering theirs – will continue. 

“That will create a diversifying of monetary-policy expectations that will be reflected in the exchange rates,” Kobsidthai added.

Sompop Manarungsan, president of the Panyapiwat Institute of Management, said he didn’t think China would suffer a hard landing, thanks to its wealth of financial resources. China has already boosted domestic consumption to compensate for the impacts of the trade war with the US, he said.

“However, should China’s growth rate drop below 6 per cent, it would be cause for concern for other countries, including Thailand, which have participated in China’s supply chains,” Sompop warned. 

Teerana and Sompop agreed that the US-China trade dispute would continue for some time, with current negotiations likely to produce nothing more than another temporary truce. 

Source - TheNation