Firms advised to import amid high baht

The baht has strengthened quickly in recent days, and companies should look at grabbing this opportunity to import machinery and necessities for post-flood restoration, Bank of Thailand Deputy Governor Suchada Kirakul said. 

A large amount of foreign capital is flowing into Asia amid a clearer solution to Greece’s sovereign debt problem, strengthening regional currencies including the baht. 

“Don’t be in a panic. We are on all-time alert on capital movements,” Suchada said, noting that the central bank had not spotted any irregularities yet surrounding the inflow. Currently, investors prefer short-term plays, particularly in equities and bonds, for fear of global uncertainties.

After Greece recently reached an agreement with its private creditors to secure the biggest sovereign restructuring in history, paving the way for a second bail-out of the debt-ridden nation, foreign capital was pouring into Asia, including Thailand, late this week to seek higher returns. 

“We have seen balanced flows in the past month or two. But the Thai currency has only been strengthening fast for the past one to two days. The baht is relatively volatile now,” Suchada said.

The baht was trading at 30.41 per US dollar yesterday at 3.25pm, according to Bloomberg. Since the beginning of the year, the Thai currency has strengthened by more than 4 per cent against the greenback. 

All other regional currencies are picking up and the Thai currency is moving in the same direction, Suchada said. Malaysia’s ringgit has appreciated by more than 5 per cent, while India’s rupee has strengthened by about 8 per cent. The Singapore dollar is about 3 per cent stronger.

There is unlikely to be high pressure on the baht, and the situation is not similar to 1997, when the Thai currency was fixed and the Asian financial crisis took place, Suchada said. She suggested that companies needing to replace machinery and other necessities after the flood disaster import it now, and those wanting to invest overseas also act now because of the currently accommodative Thai currency and low interest rates.

“It is a good time now to buy FX [foreign exchange] for imports and overseas investment. The interest rates are low and [the Thai] currency is supportive,” she noted, conceding that the recent capital inflow was seeking short-term returns.

Speaking yesterday at the Bibor Awards 2012, Suchada said the central bank had been encouraging the use of the Bangkok Interbank Offered Rate (Bibor) as a reference rate for commercial banks to extend loans to the business sector. 

Bibor, which is referred on one-to-three-month interbank lending, better reflects market expectations on the BOT’s policy rate than the minimum lending rate, which is dependent on term deposits, she said. 

The number of one-to-three-month interbank transactions with reference to Bibor rose 16 per cent in 2011, while three-month transactions soared sevenfold. 

Issuance of bills of exchange with reference to Bibor surged 322 per cent. Corporate loans with reference to Bibor edged up 3.2 per cent.

For this year, Siam Commercial Bank was presented the Bibor Award for Best Interbank Dealer, Tokyo-Mitsubishi UFJ for Best Corporate Lender, and Standard Chartered Bank (Thai) for Best Bill of Exchange and Floating Rate Bond Issuer.
 Thanachart Bank was won the recognition award on Interbank activities, Bangkok Bank on corporate lending, Kasikornbank on floating rate bond trading, and TMB Bank on B/E and floating rate bond issuing.