BoT, Finance Ministry wrangle baht

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From Bangkok Post

The Finance Ministry has discussed managing the baht's movements with the Bank of Thailand in a bid to help exporters and recoup the economy amid a tourism slump.

The export sector plays an important role in helping stimulate the economic recovery as the tourism industry remains battered by adverse effects stemming from the pandemic, said Finance Minister Arkhom Termpittayapaisith.

Although the baht’s value is moving in line with that of regional currencies, the ministry has asked the central bank to “take care” of the local currency’s movement, said Mr Arkhom.

The baht rose as much as 0.8% to 30.195 to the US dollar on Wednesday, its highest intra-day level since Jan 14, according to data compiled by Bloomberg.

The baht has surged 4.7% this quarter as foreign inflows into Thai stocks and bonds resumed and emerging market currencies rallied on optimism over the global economic outlook, Bloomberg reported.

Overall, the local currency has rebounded almost 9% from this year’s low in April and is close to wiping out its entire losses for the year.

The baht's value looks set to strengthen further following the dollar depreciation as Democratic presidential candidate Joe Biden is poised to become the next US president, subsequently lowering downside risks to the global economic growth outlook and prompting funds to seek higher risk assets, said Kasikorn Research Center.

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From The Nation

BOT must cut policy rate close to zero to rein in baht’s appreciation

The latest measures by the Bank of Thailand (BOT) designed to encourage capital outflows would have some impact on the value of the baht but they would not be effective in controlling the Thai currency's rise, said Anusorn Tamajai, a former BOT director and ex-dean of Rangsit University’s Faculty of Economics.

The BOT on Friday liberalised the foreign exchange rate market, allowing residents to freely deposit funds in foreign currency deposit (FCD) accounts, raised the limit for investment in foreign securities and required investors to make bond pre-trade registration.

Anusorn said these measures may not be adequate in stopping the baht from appreciating further, as foreign investors had still bought Thai bonds on Friday after the central bank had introduced the new measures.

He predicted that the baht would rise beyond Bt30 to the dollar to between Bt28 and Bt29 by the end of this year or in the first quarter of next year.

He suggested that the central bank  introduce the yield curb control (YCC) measure in dealing with the exchange rate market.

The BOT should target the yield of Thai bonds, for example set the target yield rate of the bond with 1-2 years maturity at 0.5 per cent, 3-4 years maturity at 0.75 per cent and 7-10 years maturity at 1.4 per cent.