BOT poised to tame runaway baht

BOT governor Veerathai Santipraphob yesterday made a rare statement expressing his unease over the consequences of the baht’s sharp gains.
He said the US dollar had weakened drastically over the past week and caused the value of the baht and other currencies in the region to spike.
The regional currencies had already been rising strongly against the greenback over the past year.
“The BOT is concerned that if the baht continues to rise sharply over a short period, it would hurt the economy,” he said in a statement. “Therefore, the central bank will step up its currency surveillance and closely monitor capital movements.
“The BOT is ready to issue additional measures if the baht swings unusually.”
The baht moved to 31.37 per dollar by late afternoon yesterday, up 0.27 per cent from the day before. 
Khobsithi Silpachai, the head of capital markets research at Kasikornbank, said the central bank could not do much to prevent the baht from appreciating further due to the impact on the dollar’s trajectory of a statement by US Treasury Secretary Steven Mnuchin that he was happy with a weak US dollar. 
The baht rose 10 per cent last year and has since increased 3.86 per cent this year, second only to the Malaysian ringgit among currency gainers in the region.
The ringgit has added 4.7 per cent, while the yen has risen 3.2 per cent and the yuan by up to 3 per cent.
Kobsithi said he may need to review a forecast of movements in the baht after Mnuchin’s statement, which has been seized on by the markets.
He said he had estimated that the baht would rise to 31.20 per dollar within the first or second quarter, before move back to 33 by the end of this year. 
The latest developments suggest the Thai currency would strengthen faster than he had originally thought, Kobsithi said. 
Thailand is expected to continue to have a large current account surplus this year due to an expansion in tourism revenue and exports, so this underlines the baht’s increased value, he said.
Anusorn Tamajai, an economics lecturer at Rangsit University, said the BOT may allow Thai investors to invest more abroad in order to curtail the rise of the baht. 
Exporters recently met with central bank officials for talks on the impact of the rising baht. 
Thai companies have also complained about impact of both the stronger baht and the government’s plan to mandate increases in the minimum daily wage. 
They fear that both factors would increase companies’ cost burdens.
Roongrote Rangsiyopash, president and chief executive of Siam Cement Group (SCG), said that the strengthening baht would hurt its business, which relies heavily on exports as well as its international businesses, as their sales are linked to the US dollar. 
The currency’s appreciation would also affect SCG’s petrochemical business, which also sells its products at prices linked with the dollar.
“What we have been doing is to increase our efficiency and competitiveness. When we conclude the sales deals with our clients, we will make a risk protection arrangement for such deals,” Roongrote said.
For every Bt1 gain in the currency, about Bt2 billion of the group’s sales revenue would be affected, he said.
Roongrote said that the group has flagged the baht’s strength as a key challenge for SCG’s business this year, together with the rising cost of raw materials and tougher competition in the cement and construction material businesses.