Foreign currency cap could rise
The Bank of Thailand may relax regulations on foreign-currency deposits for resident accounts to help stem rapid appreciation of the baht, thereby allaying fears of exporters. Meanwhile banks are worried about rising bad loans due to the euro crisis and
Central bank Governor Prasarn Trairatvorakul yesterday said it might allow residents to deposit much more than the existing cap of US$100 million (Bt3.1 billion) in foreign currency for deposit periods of longer than one year.
“In the future, the central bank may change this rule,” he said.
The BOT encourages Thai corporations to make investments abroad and allows residents to have foreign-currency deposit accounts without limit for periods of less than one year, but limited to $100 million for longer periods.
The baht yesterday weakened after it rose when the US Federal Reserve announced last Thursday that it would buy long-term bonds worth about $85 billion per month until employment improves in the United States. The Fed also promised to keep the target range for the Federal Funds Rate at 0-0.25 per cent, an exceptionally low level, at least through mid-2015.
Economists and market analysts believe that the Fed action coupled with the European Central Bank’s government-bond-purchase plan will cause huge capital inflows to Asia, including Thailand.
Huge inflows of hot money could appreciate the baht rapidly, only to see the currency weaken sharply when the foreign capital reverses its course, resulting in exchange-rate destabilisation.
Prasarn said the baht had moved along with regional currencies.
“It has not appreciated much, and today it weakened a bit, so it is a good time for those who want to use dollars [to do so], as the dollar is cheaper now,” he said yesterday.
Meanwhile, Bloom-berg reported that its survey suggested that Thai exports in August dropped by 5.9 per cent because of the slowdowns of China and the United States, after a drop of 3.9 per cent in value in July.
