Rumours that Central Bank will fix US$-THB at 36.00

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Baht moves in high volatility Monday

 

The baht Monday moved in high volatility on rumour hat the central bank would turn back to implement the fixed baht regime at Bt36 to the greenback.

 

The baht opened the market at Bt34.95Bt34.98 to the US dollar before closed the market at Bt35.05Bt35.08. It was strengthened from Friday's close at Bt35.05.

 

There was reportedly that the central bank last Friday urged dealers at banks to adjust their foreign-exchange positions, resulting in banks buying up US dollar and causing the baht to weaken significantly on that day.

 

The Nation

 

 

[Guest BKKvisitor]

 

The Bank of Thailand (BOT) has rushed to dismiss a market rumour that it plans to peg the exchange rate at Bt36 to the greenback.

http://www.nationmultimedia.com/2007/03/27...es_30030354.php

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FINANCE EXCHANGE RATE POLICY RUMOURS SWIRL

Chalongphob rules out pegging baht, says it's impossible

BANGKOK POST REPORTERS

 

Thailand will not change the managed float exchange rate system, said Finance Minister Chalongphob Sussangkarn. ''It is 100% impossible. There will be no drastic changes. The managed float system is the best, although it is a question how best to manage the exchange rate,'' he said.

''Countries across the region have been affected by volatile capital flows. And yet the market should understand that the authorities need to have instruments to manage volatility,'' he said.

 

Rumours circulated wildly in the banking community yesterday that the Bank of Thailand was considering a return to the fixed-rate basket system used prior to the 1997 economic crisis. Central bank governor Tarisa Watanagase hastily called a meeting with domestic and foreign bankers to clarify the exchange rate policy. ''The rumours are unfounded. There have been no changes,'' she said.

 

But the baht yesterday weakened to 35.03 to the dollar, compared to 34.7 last week, after the central bank directed dealers on Friday to reverse their current market positions to match their holdings at the beginning of the year. Authorities also tightened reporting requirements to force banks to submit daily updates of buying and selling activity, and emphasised that banks should ''cooperate'' with the central bank in guarding against baht speculation.

 

Ms Tarisa declined to offer details on the measures, saying only that ''some banks had been taking advantage of the system and speculating on the baht''.

 

Apisak Tantiworawong, chairman of the Thai Bankers Association, said the central bank indicated clearly yesterday that local financial institutions should not speculate on the currency. ''The message is that while market speculation is acceptable, it shouldn't be from the banks themselves,'' he said.

 

Steady export growth, weak imports and volatile capital inflows have helped push the baht to a nine-year high against the dollar. While a stronger baht reduces import costs and inflation, exporters have seen profits decline in the global market.

 

Local bankers said the order to readjust their currency portfolios would push the baht weaker this week as most banks would have to buy dollars. Thai banks have to adjust their positions by today and foreign banks get until tomorrow. ''The clear signal is that this is a warning shot, and that even tougher measures could follow if things don't improve,'' one foreign banker said. Dealers said the move would only offer temporary relief, as the trend still clearly pointed towards a stronger baht.

 

M.L. Thongmakut Thongyai, head of equities of Citicorp Securities (Thailand), said market rumours had focused on whether the central bank's Dec 18 reserve rule on foreign inflows would be scrapped. ''Market sentiment will improve if the measure is cancelled. But I think we will also see new controls, ones more directly addressing speculators,'' he said.

 

Bangkok Post