Baht to remain volatile for now, BOT warns

Meanwhile markets are keeping an eye on the monetary policies of major economies and the baht’s depreciation will help reduce Thailand’s competitive disadvantages, the central bank said.

Vachira Arromdee, senior director of the Financial Markets Department at the BOT, said the Thai currency would tend to con-tinue its volatility in the next periods, given internal and external factors.

Markets are still watching for |the United States’ likely interest-|rate increase, and monetary stimulus in Japan and the European Union.

Markets are still concerned over China’s economic slowdown as that could affect exports, which have contracted in Asia since the beginning of the year.

Given uncertainties over the global economic recovery and its fragility, there remains possibility for two-way directions and business operators should shield themselves against foreign-exchange risks, Vachira said.

Since the beginning of the year, the baht had been appreciating against the currencies of Thailand’s trading partners and competitors partly because of drops in global oil prices. In March, however, the Thai currency started moving with volatility in two directions, following the country’s economic and monetary-policy movements, US moves and economic situations across the globe.

Vachira noted that most US |economic figures had been weak of late, prompting the US dollar’s depreciation against regional currencies in this region, including the baht.

This month, the baht has moved in a range of 33.18-33.88 per US dollar, and since the beginning of the year, it has depreciated by about 2 per cent. Given such rapid changes, the baht’s volatility rate rose from 3-4 per cent to 6-7 per cent. However, that is still lower than the currency volatility seen in other countries in the region.

Exporters see relief

Chantavarn Sucharitakul, assistant BOT governor for the Financial Markets Operations Group, said the Thai currency’s depreciation had helped exporters gain more income in baht terms. Given the lower gap between the baht and the currencies of its trading partners and competitors since the start of the year, exporters have seen their disadvantages soften.

In response to a question on the baht and Thailand’s economic fundamentals, Chantavarn explained that the baht followed both fundamentals and forecasts.

"We believe the market mechanism reflects proper exchange rates," she said.

The baht yesterday weakened |to 33.5 per US dollar and stayed |there for a while, reflecting both buyers’ and sellers’ satisfaction with this level.