EXIM Bank urges traders to hedge on forex to cut US risk
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The Export-Import Bank of Thailand (EXIM Bank) is calling on Thai importers and exporters to start hedging on foreign exchange in order to prepare for volatility if the United States is unable to extend its debt ceiling.
Kwanjai Techasanskul, EXIM Bank’s first vice president of the Business Research Department, said last week that if the US was unable to extend the debt ceiling, then fund flows would become volatile and end up hurting the Thai currency. Hence, exporters and importers should opt for forex hedging to protect themselves.
She said the US debt ceiling would have a crucial impact on the global economy, unlike the partial shutdown, which will only have a short-term impact as the US seeks to resolve the problem.
Thailand’s exports to the US account for about 10 per cent of the total volume and if Washington is unable to extend the debt ceiling then it might lead to a debt default, which could affect Thai exports, she explained.
When the US sub-prime mortgage-linked crisis took place in 2008, Thai exports dropped by 14 per cent. Similarly, if the US debt-limit problem is not solved in time, the default would have a serious impact on the global economy, she said.
Kwanjai went on to say that it was difficult to estimate how serious an impact the debt ceiling would have on capital inflow, adding that the baht could either appreciate or depreciate, which is why traders should cut down on their risks by forex hedging.
Several industries may be affected
Industries that will be affected by the debt-ceiling problems include computers and equipment, rubber, gems and jewellery, canned foods, electrical appliances and electronics parts as these are the key exports to the US, she said.
EXIM Bank estimates that export this year should not rise more than 2 per cent even though the export volume in August rebounded to grow by 3.9 per cent after mere 1-per-cent growth in the first eight months. Though Thai exports are expected to
“Even though export to the US is only 10 per cent and Thailand has diversified into emerging markets, these countries also have to export to the US, which means the debt-ceiling problems would have a direct and indirect impact on export markets,” she said.
