BOT suggests ways to mitigate US dollar volatility
The Bank of Thailand (BOT) supports the use of local currencies for trade between countries to reduce the risk amid volatile fluctuations in the dollar.
In particular, the Bank encourages the use of four local currencies for cross-border trade which, it says, should minimise risks associated with the fluctuating US dollar, which has recently reached 8-9%. This has led to increased hedging activities among business operators.
The increased volatility of the US dollar against the Thai baht has prompted the Bank to expedite support for entrepreneurs to use local currencies in cross-border trade.
This is not the first time the BOT has pushed for the use of these four currencies, namely the Chinese yuan, Malaysian ringgit, Indonesian rupiah, and Japanese yen, and intends to further promote their increased usage shortly.
The BOT's Deputy Governor for Monetary Stability Alisara Mahasantana, stated that the main objective of promoting the use of local currencies is to provide an alternative for entrepreneurs to pay for goods and services, particularly when some foreign currencies are excessively volatile.
“During periods of significant dollar volatility, business operators can opt to use these local currencies for payments instead. This reduces the risk associated with exchange rates, making trade negotiations easier,” Alisara said.
