Baht Expected to Remain Strong Until Mid 2007

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Note from GB: I don't claim to be any kind of an economist, but less than four months ago the predictions were that the exchange rate would be about 42 baht to the US dollar by now. Famous last words.

 

BANGKOK, Dec 3 (TNA)

 

Economists predict continued baht strength until the middle of next year and a booming stock market, but warned that a more dramatic braking of the US economy could yet see funds flowing out of the region as fast as they have flowed in.

 

Usara Wilaipich, senior economist at Standard Chartered Bank in Bangkok, said at a seminar on Investment Prospect in the Year of the Pig held by the Stock Exchange of Thailand, that Thai investors need to monitor the economic development in the US closely.

 

She attributed the baht rise to the recent influx of foreign investment into the financial and stock markets, pushing the baht, along with other Asian currencies, to record highs. Investor sentiment has been buoyed by low inflation, low interest rates and a healthy trade balance, Usara added.

 

However, the country

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Thai Central Bank Curbs Short-Term Capital Inflows

 

BANGKOK, Dec 4 (TNA)

 

In an attempt to prevent speculation in the Thai baht, the Bank of Thailand on Monday sought cooperation from financial institutions in Thailand to monitor short-term transactions with nonresidents after the currency hit an eight-year high against the US dollar last week.

 

Tarisa Watanagase, Governor of the Bank of Thailand (BOT), attributed the rapid appreciation of the baht to the depreciating US dollar and the economic stability of Thailand and the Asian region which has caused capital to flow from USD-denominated markets into Asian markets, including Thailand.

 

In addition, the BOT said in a statement, significant short-term inflows into the debt securities market also contributed to the increased volatility of the local currency.

 

To prevent speculation on the local currency, the bank asked financial institutions to refrain from selling and buying all types of debt securities through sell-and-buy back transactions for all maturities.

 

"Such transactions are financial instruments through which nonresidents can undertake to evade BOT measures preventing baht speculation," the bank said.

 

Financial institutions are allowed to sell and buy foreign currencies with nonresidents or to credit or debit Nonresident Baht Accounts for settlements relating to investments in government bonds, treasury bills or BOT bonds only when such investments are longer than three months, according to the central bank statement.

 

Apart from that, the bank said, financial institutions are allowed to borrow Thai baht from nonresidents including through sell-buy swap transactions when there are no underlying trades and investments in Thailand for maturities longer than six months, an increase from the three month level of the previous measure.

 

"The measures aim at lessening volatility in the foreign exchange market while minimizing the adverse impacts on the bond and other debt securities markets," the central bank governor explained.

 

The bank also asked Thai businesses not to issue or sell short-term debt securities to nonresidents.

 

The baht, which was trading Monday at around Bt35.90 to the US dollar, has gained about 14 per cent on the dollar since early this year.

 

(TNA)-E001

 

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BANGKOK, Dec 7 (TNA)

 

Bank of Thailand