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Baht’s rise due to continuous current account surplus: BOT

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Baht’s rise due to continuous current account surplus: BOT

By THE NATION

 

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Mathee Supapongse

 

The Bank of Thailand (BOT) has intervened in the foreign exchange markets to rein in the rising baht, which had resulted in purchase of 80 billion US dollars over the past five years.

 

The BOT vowed to take more action if needed and urged other agencies to jointly tackle the appreciation of the currency.

 

The BOT is closely monitoring the baht’s value, Mathee Supapongse, deputy governor of monetary stability, revealed on Tuesday (January 14), adding it was due to structural problems.

 

He said the baht’s appreciation, especially in the second half of last year, was caused by Thailand’s current account surplus.

 

The current account surplus resulted from higher revenue coming from exports and tourism compared to outflows for imports.

 

Mathee added that the current account surplus was not a result of short-term speculation by foreign investors.

 

Previously, the BOT had slowed down the baht's appreciation by purchasing dollars and selling the baht. This operation increased Thailand’s foreign exchange reserves continually.

 

In the past five years, Thailand’s exchange reserves increased US$80 billion. “If the BOT did not manage the appreciation, it would have been more severe than at present,” Mathee added.

 

However, the BOT saw the baht appreciation as a structural problem from continuous current account surplus and the low rate of foreign securities investment.

 

“Appreciation management, as well as other short-term financial measures, were necessary for the current economic situation,” the deputy governor added.

 

He concluded that the issue of the baht’s appreciation needed collaboration from relevant agencies, pointing out that there were numerous ways to cope with the problem.

 

“We should increase our imports of infrastructure and machinery to improve Thailand’s production, at a time when the baht is appreciating,” he said. “Also, relevant agencies should reduce the baht’s purchasing strength in the export sector, by keeping Thai revenue in foreign currency deposits.”

 

Source:  https://www.nationthailand.com/news/30380539

 

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-- © Copyright The Nation Thailand 2020-01-14
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Thai central bank says ready to curb resilient baht if needed

By Kitiphong Thaichareon, Orathai Sriring

 

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FILE PHOTO: New baht banknotes featuring Thailand's King Maha Vajiralongkorn are unveiled during a news conference at Bank of Thailand headquarters in Bangkok, Thailand, July 3, 2018. REUTERS/Athit Perawongmetha

 

BANGKOK (Reuters) - Thailand's central bank is still concerned about the strength of the baht THB=TH and is ready to take further action if necessary, a deputy central bank governor said on Tuesday.

 

The baht’s gains have been driven by the country’s large current account surplus, and not speculation in the currency, Mathee Supapongse told a news briefing.

 

“We have a lot of weapons ready, but there is no speculation from foreign investors yet,” he said, adding the central bank was monitoring the market closely.

 

As Asia’s best performing currency in 2019, the baht rose nearly 9% against the dollar, putting more pressure on the export-dependent economy amid global trade tensions and markets are concerned the authorities will introduce capital controls, among other steps.

 

The baht traded at 30.24 per U.S. dollar at 0510 GMT.

 

Rising international reserves show the Bank of Thailand (BOT) has closely managed the baht by buying dollars, Mathee said. The reserves increased by $18 billion to $223 billion in 2019.

 

“If the BOT had not intervened, the reserves would not have risen and the baht may have been stronger than this,” he said.

 

But the central bank is mindful of side-effects and limitations of currency intervention, as it may face trade protagonist measures from other countries, he said.

 

On Monday, the U.S. Treasury said Thailand was close to triggering thresholds to be added to its currency monitoring list.

 

Mathee also said quantitative easing was not suitable for Thailand due to very high liquidity and it would largely benefit certain business groups.

 

The central bank will further relax rules to spur outbound investment to help ease upward pressure on the baht, he said.

 

Last year, the BOT introduced steps against short-term speculative inflows and relaxed rules to spur fund outflows in a bid to curb the baht’s strength.

 

In November, the central bank said within the next three months the limit exporters can keep proceeds abroad will be raised to $1 million per lading bill from $200,000 currently. Such proceeds account for about 80% of all exports.

 

While the baht’s appreciation has affected the economy by hurting export competitiveness, it has benefited importers and companies and individuals with foreign debt, he added.

 

The central bank has forecast Southeast Asia’s second-largest economy will expand 2.8% this year after growing by an estimated 2.5% in 2019, a five-year low.

 

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-- © Copyright Reuters 2020-01-14

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Blah blah Rome is burning whilst the rich men are fiddling rinse and repeat over and over until the economy is toast then millions of super rich Vietnamese will be touted by TAT as the next saviors 🤔

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BOT not keen on sovereign wealth fund in baht fight

By The Nation

 

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Deputy Bank of Thailand governor Mathee Supapongse, says the proposal of a sovereign wealth fund will not help in reining in the baht's value.

 

The central bank has ruled out a proposal for the establishment of a sovereign wealth fund but promises to further relax capital outflow rules in tackling the strengthening baht.

 

Deputy Bank of Thailand governor Mathee Supapongse, said the proposal of a  sovereign wealth fund will not help in reining in the baht's value. “If the fund will just facilitate changing asset holding, for example from dollar and US bonds to oil, it would not have any impact on the baht's value”.

 

However, if the government and private sector buy dollar in foreign markets for investment overseas, it would weaken the baht, he added.

 

The baht appreciated about 8 per cent against the US dollar last year. It has been moving around at Bt30 a dollar this month, and at this level there was almost no change from last year.

 

The Thai currency occasionally weakened by 1 per cent against other appreciating currencies in the region, he said, adding that there is no need to implement drastic measures to deal with the baht's value.

 

Thailand’s current account surplus stands at 8 per cent of GDP, Taiwan 13.3 per cent and South Korea 5.2 per cent. Taiwan and South Korea have encouraged exporters not to bring dollar back into the countries and they also manage their exchange rate better, he noted.

 

The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht. It has called for cooperation from other state agencies to jointly tackle the issue. 

 

The central bank has discussed the matter with the Office of Insurance Commission which regulates many funds, said Mathee. The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said.

 

The central bank previously had relaxed capital outflow rules including allowing individual investors to directly invest in financial asset overseas. However, many critics said those measures were not effective.

 

They said the central bank may find relief soon with the US lifting China off the list of currency manipulators on Monday. The central bank has been cautious in market intervention by selling baht and buying dollar, due to US pressure.

 

Even so, the BOT bought $80 billion over the past five years, leading to a large accumulated international reserve of $227.5 billion, as of January 3.

 

Source: https://www.nationthailand.com/business/30380559

 

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-- © Copyright The Nation Thailand 2020-01-15

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"The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said".

 

This doesn't seem to have much effect, Thai exporters want to hold Baht not Dollars plus overseas investments don't seem to be their thing (except corporate investment). Many posters will automatically think this will mean they can transfer money out of Thailand more easily, it doesn't, nothing will change when it comes to transactions by foreigners, only those by Thai nationals.

 

"The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht". 

 

Driving around the North yesterday I was struck by how much construction work is underway, new major road expansions (Chiang Mai/Lamphun), two new large hospitals/buildings Lamphun & San Sai, new court houses (Lamphun/Lampang), new airport planned (Chiang Mai) government is spending money and building out infrastructure, if this is being repeated elsewhere in the country the government is investing huge amounts of money in the economy.

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17 hours ago, webfact said:

He concluded that the issue of the baht’s appreciation needed collaboration from relevant agencies, pointing out that there were numerous ways to cope with the problem.

Seems like a great time to buy a few subs and military hardware to me

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