Monday, August 10, 2020

BOT not keen on sovereign wealth fund in baht fight

Jan 15. 2020
 Deputy Bank of Thailand governor Mathee Supapongse, says the proposal of a  sovereign wealth fund will not help in reining in the baht's value.
Deputy Bank of Thailand governor Mathee Supapongse, says the proposal of a sovereign wealth fund will not help in reining in the baht's value.
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By The Nation

The central bank has ruled out a proposal for the establishment of a sovereign wealth fund but promises to further relax capital outflow rules in tackling the strengthening baht.

 Deputy Bank of Thailand governor Mathee Supapongse, said the proposal of a  sovereign wealth fund will not help in reining in the baht's value. “If the fund will just facilitate changing asset holding, for example from dollar and US bonds to oil, it would not have any impact on the baht's value”. However, if the government and private sector buy dollar in foreign markets for investment overseas, it would weaken the baht, he added.

  The baht appreciated about 8 per cent against the US dollar last year. It has been moving around at Bt30 a dollar this month, and at this level there was almost no change from last year. The Thai currency occasionally weakened by 1 per cent against other appreciating currencies in the region, he said, adding that there is no need to implement drastic measures to deal with the baht's value.

  Thailand’s current account surplus stands at 8 per cent of GDP, Taiwan 13.3 per cent and South Korea 5.2 per cent. Taiwan and South Korea have encouraged exporters not to bring dollar back into the countries and they also manage their exchange rate better, he noted. The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht. It has called for cooperation from other state agencies to jointly tackle the issue. 

  The central bank has discussed the matter with the Office of Insurance Commission which regulates many funds, said Mathee. The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said. The central bank previously had relaxed capital outflow rules including allowing individual investors to directly invest in financial asset overseas. However, many critics said those measures were not effective.

  They said the central bank may find relief soon with the US lifting China off the list of currency manipulators on Monday. The central bank has been cautious in market intervention by selling baht and buying dollar, due to US pressure.

  Even so, the BOT bought $80 billion over the past five years, leading to a large accumulated international reserve of $227.5 billion, as of January 3.

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