Baht remains competitive, says BoT
Baht remains competitive & in line with competitors in export markets despite offshore fund flows into domestic financial markets.
Baht remains competitive & in line with competitors in export markets despite offshore fund flows into domestic financial markets.
CURRENCIES
Baht remains competitive, says BoT
Strong currency causes private sector jitters
01/09/2016
Pathom Sangwongwanich & Pawee Sirimai
The Bank of Thailand (BOT) has tried to allay the private sector's concerns over the strengthening baht.
The BOT has affirmed that the currency's value remains competitive amid substantial offshore fund flows into the domestic financial market.
BAHT'S VALUE SHOULD NOT DIVERGE FROM TRADING COMPETITORS
"We have continuously discussed the matter with the private sector and other industries. The private sector has emphasised that the baht's value should not diverge from that of Thailand's trading competitors," said central bank governor Veerathai Santiprabhob.
"The baht's value has moved in line with the trend of regional currencies," he added, reiterating that the central bank has been collaborating with financial institutions to assist domestic businesses to manage heightening foreign exchange fluctuations.
The baht fell slightly to 34.61 to the US dollar yesterday from 34.60 on Tuesday, according to Reuters.
BAHT RISING WITH REGIONAL CURRENCIES WHILE US DOLLAR FALLS
One might suspect that the recent bombing and arson incidents in several southern provinces might lead to a falling baht.
However, the baht rose rapidly in August.
The baht followed the upward trend of regional currencies while the US dollar fell in value amid weaker-than-expected US economic data.
The baht rose at a fast clip after the UK's Brexit vote in June and the passage of the new constitution.
The surprising second quarter economic growth also helped.
EXPORTERS NOT HAPPY ABOUT STRONGER BAHT
The rising baht has made Thai exports more expensive.
The loss of competitiveness has angered exporters somewhat.
They have urged the Bank of Thailand to come up with measures to curb the strong local currency.
BAHT VOLATILITY
Year-to-date daily volatility rate of the baht against the dollar has been recorded at 4%, lower than the 8% experienced by the Malaysian ringgit and the Korean won or the 20% registered by the Japanese yen, said Mr Veerathai.
Foreign exchange volatility will likely continue to prevail mainly due to external factors such as the effects of advanced economies' monetary policies and the recovery of certain industrialised economies, together with the greenback's depreciation, causing regional currencies to appreciate.
Bank of Thailand governor Veerathai Santiprabhob insists the value of the baht is in line with others in the region, and produced charts (below) to try to prove it. (Photo by Pattarachai Preechapanich)
CENTRAL BANK POLICY
The central bank has managed capital inflows through the use of policy tools in order to prevent massive fund inflows impeding Thailand's economic recovery,
The central bank stands ready to use those tools when it considers foreign exchange movement to be incompatible with financial stability or the country's economic recovery, said Mr Veerathai.
Central banks in emerging market economies should place great importance on policy tools to manage fund flow movements, he said.
In a separate development, the Commerce Ministry yesterday revised customs-cleared exports in July to a contraction of 6.4% year-on-year from a 4.4% drop stated on Aug 26.
Annual exports in January-July were revised to a 2.3% fall from a 2% decline.
The ministry also revised July's trade surplus to US$843 million from $1.21 billion stated earlier.
http://www.bangkokpost.com/business/finance/1075416/baht-remains-competitive-says-bot
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