Thursday, November 21, 2019

Finance Minister vows more action if baht continues rapid appreciation

Nov 08. 2019
Finance Minister Uttama Savanayana said the central bank and the Finance Ministry had together come up with the measures announced on Wednesday.
Finance Minister Uttama Savanayana said the central bank and the Finance Ministry had together come up with the measures announced on Wednesday.
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By The Nation

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The baht on Thursday closed at Bt30.32 to the dollar in onshore trade, maintaining Wednesday’s level when the central bank cut its policy rate and issued key measures to rein in the rapid appreciation of the Thai currency.

Finance Minister Uttama Savanayana said the central bank and the Finance Ministry had together come up with the measures announced on Wednesday.

“It is the first step, and we will do more in the future,” he said in response to scepticism about the effectiveness of the measures to rein in the rising baht in the long run.

The central bank announced several measures including allowing exporters to park more money abroad, allowing retail investors to invest directly in foreign securities, increasing the aggregate investment limit regulated by the Securities and Exchange Commission, facilitating easier transfer of money out of the country for individuals and allowing foreign currency settlement for onshore gold trading.

“We don’t believe that the rate cut and the measures to boost capital outflows would be effective in weakening the baht,” said Jitipol Puksamatanan, chief markets strategist at Krung Thai Bank.

“Market participants believe the baht is a safe haven asset and hence there is high demand for the Thai currency,” he added.

He, however, agreed that it was an important step in increasing liquidity in the foreign exchange market, which may lead to less market intervention by the central bank in the long run. Gold traders will also enter the currency speculation turf, he added.

Phacharaphot Nuntramas, senior director at Krungthai Compass research, predicted that the baht may continue to appreciate and even rise to Bt29 to the dollar by early next year. This is because the steady increase in tourist arrivals would bring in more earnings in foreign currencies. It is also the season for exporters to repatriate their earnings back home, he noted.

Meanwhile, Visit Limluecha, vice chairman of the Thai National Shippers’ Council -- an exporters’ club -- said that exporters were satisfied with the latest measures to curb the baht’s rise. However, it remains to be seen whether these measures will be effective. “If the baht is going to continue to rise, the central bank may need to impose drastic measures to deter short-term inflows aimed primarily for speculation,” he said. 

Somprawin Manprasert, chief economist and executive vice president at Krungsri Bank, said the rate cut and capital outflow measures demonstrated that the central bank was moving in the right direction. The baht is unlikely to appreciate rapidly as it did in the past, he said, adding Thailand could achieve economic growth of 2.9 per cent this year, down from the 3.8 per cent growth forecast early in the year.

“The economy will not slide further,” he said, sounding optimistic.

He, however, suggested that the Bank of Thailand should communicate more with the market.

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