Exchange Rate: Baht Appreciates Again - US Dollar Falls Further

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For the first time in many years, the exchange rate between the baht to the US dollar has fallen to under 36 baht per dollar.

 

At the moment I'm writing this, the exchange rate is 35.98 baht to the US dollar.

 

The other major currencies are as follows at this time (8:50 AM in Thailand):

 

Euro: 47.355

 

British pound: 70.105

 

Australian dollar: 27.9875

 

Canadian dollar: 31.595

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Central Bank Intervenes in Baht Movement with Caution, Says Governor

 

BANGKOK, Nov 29 (TNA)

 

Bank of Thailand

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Local bank dealers confirmed that there had been speculation, adding that the currency had appreciated too rapidly also because of the weakening of the US dollar. During the past six months, it has gained Bt2 against the greenback, which is far more than other currencies in the region.

 

"Without intervention, the baht could rise further to Bt35.80 soon," said one dealer.

 

Foreign speculators have found new ways of financing the speculation, BOT assistant governor Suchada Kirakul said, adding that the unit has strengthened too quickly - to a level not justified by economic fundamentals.

 

The BOT has learnt that a number of non-resident investors have bought into baht bonds from Thai banks with the agreement to sell back the bonds in a certain period. This is equivalent to the borrowing of baht from local banks, and waiting for the right time to convert the currency into US dollars when the greenback slides further. Once the first sell-back agreement expires, they strike another revolving contract.

 

"This has taken place after the central bank plugged a hole by forbidding commercial banks to sell bills of exchange with a maturity of less than one year to non-residents," Suchada said......

 

Full article

 

http://www.nationmultimedia.com/2006/12/01...ss_30020410.php

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The following appears in THE NATION:

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SOARING CURRENCY

 

Speculators Behind Baht Surge: BOT

 

Non-Residents Have Been Buying Baht Bonds to Lay Hands on Thai Currency

 

The Bank of Thailand blamed foreign speculators for driving the baht beyond the Bt36 level to an eight-year high yesterday.

 

The baht opened at Bt36.07-Bt36.10 and closed at its peak for the day of Bt35.95-Bt35.98 - the highest in eight years.

 

Local bank dealers confirmed that there had been speculation, adding that the currency had appreciated too rapidly also because of the weakening of the US dollar. During the past six months, it has gained Bt2 against the greenback, which is far more than other currencies in the region.

 

"Without intervention, the baht could rise further to Bt35.80 soon," said one dealer.

 

Foreign speculators have found new ways of financing the speculation, BOT assistant governor Suchada Kirakul said, adding that the unit has strengthened too quickly - to a level not justified by economic fundamentals.

 

The BOT has learnt that a number of non-resident investors have bought into baht bonds from Thai banks with the agreement to sell back the bonds in a certain period. This is equivalent to the borrowing of baht from local banks, and waiting for the right time to convert the currency into US dollars when the greenback slides further. Once the first sell-back agreement expires, they strike another revolving contract.

 

"This has taken place after the central bank plugged a hole by forbidding commercial banks to sell bills of exchange with a maturity of less than one year to non-residents," Suchada said.

 

Prior to that, the BOT also forbade non-residents from maintaining individual outstanding deposits of more than Bt300 million.

 

The new financing scheme by speculators was introduced at a time when domestic interest rates were on a downward trend. This leads to a decline in long-term bond yield curves and boosts trading activity in baht bonds.

 

The baht came under severe speculative pressure in 1997, when it was dumped heavily. The central bank launched a massive intervention scheme in a bid to prevent the fall, which later led to the unit's devaluation in the same year and the financial crisis.

 

Suchada said the central bank would investigate and seek cooperation from commercial banks, as it tries to come to grips with the situation.

 

Exporters have cried foul over the irregular baht movement.

 

The central bank estimates that every percentage-point increase in the value of the baht against the dollar will slash Thailand's growth in gross domestic product by 0.3 of a percentage point. This would widen the current-account deficit, as export income would be hit as a result. Wider current-account deficits in turn would eventually weaken the baht.

 

Boonsithi Chokwatana, chairman of Saha Group, said foreign businessmen the company had met had expressed concern over the rising baht.

 

Industry Minister Kosit Panpiemras yesterday said he was aware of the strong-baht problem, but the decision on whether to intervene in the market is up to the central bank.

 

Also yesterday, Commerce Minister Krirk-krai Jirapaet said after a discussion with export associations that while the government would seek measures to relieve exporters' burdens due to the strong baht, it would need to ensure the measures do not affect fiscal stability.

 

"We don't know where the baht is heading, or which measures would be applicable to which product. If we do too much, it could be taken as a subsidy. We need to look at the products, item by item. Exporters also need to be concerned with the exchange effects and urgently improve their product quality," he said.

 

Representatives from associations involved in frozen foods, chicken and fruit exports expressed concerns over the strong baht. They urged the government to stabilise the baht/dollar rate and monitor comments from economists on the baht's movement.

 

They also urged the central bank to review the requirement that exporters must hold dollar-denominated bills for 15 days, after receiving payments. The requirement was aimed to prevent pressure on the baht when the currency was weak against dollar.

 

However, exporters said that holding the dollar would only incur exchange losses once they convert into baht.

 

Krirk-krai said on Wednesday that he would seek an urgent discussion with Finance Minister MR Pridiyathorn Devakula to use fiscal measures to help exporters.

 

Despite the baht appreciation, economists polled by Dow Jones Newswires believed the BOT would probably shrug off the pressure and wait until next year to cut the policy rate, which is now 5 per cent. The Monetary Policy Committee next convenes on December 13.

 

"Many exporters expect the central bank to respond to the baht's strength by cutting interest rates, but the main focus of the central bank's interest-rate policy is price stability. It's not about the interest-rate spread," said Standard Chartered's Usara Wilaipich.

 

"Besides, a rate cut would have only a brief effect on the baht, which has been driven up by inflows into Thai stocks and bonds."

 

Anoma Srisukkasem,

 

Somruedi Banchongduang

 

The Nation

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The following appears in THE NATION:

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BOT Ready with Steps to Stop Baht Speculation

 

The Bank of Thailand will soon introduce new measures to block speculative capital inflows - the "hot money" speculators bring into the Kingdom to influence the baht, which has risen at too fast a pace over the past few days.

 

The central bank also admitted yesterday that it had been intervening in the foreign-exchange market occasionally over the past week to stabilise the baht.

 

The Thai currency has strengthened significantly at around Bt0.20 per day against the dollar over the past week, mainly due to short-term inflows. The baht opened at Bt35.81 to Bt35.86 per dollar yesterday and closed at Bt35.87 to Bt35.89, after peaking at Bt35.74 during the day.

 

A dealer from Bangkok Bank said the central bank had intervened between 3pm and 4pm to bring down the value of the baht by Bt0.30. He believes the unit will appreciate further next week, with a likely range of Bt35.50 to Bt36.10.

 

Pongpen Ruengvirayudh, the Bank of Thailand's senior director of the Financial Markets Operations Group, said yesterday the central bank would soon introduce a new measure, but declined to disclose the details.

 

She said the planned measure would be suitable for the current situation in Thailand.

 

"It is the kind of measure that solves the problem at its roots," Pongpen said.

 

She said the central bank would prefer medium-term investors rather than hot money, as the latter flows in and out quickly.

 

Short-term money helps boost market volume, but also brings about higher costs for exporters, she said, adding that the margins of some exporters are quite thin.

 

The Stock Exchange of Thailand Index rose 2.41 per cent from 723.87 points last Friday, to close at 741.38 yesterday.

 

Pongpen said the central bank believed the new measure would not destroy the trade and investment atmosphere as it will carefully implement it without any impact on real investors who are not speculators.

 

She said the central bank had studied several measures suitable for the current situation, before making the most appropriate choice.

 

Nitaya Pibulratanagit, the assistant governor, said yesterday the strengthening of the baht was due to a combination of the weakening of the dollar, the current-account surplus, and speculative activity.

 

The dollar has weakened to its lowest level in more than 14 years against the pound, and the lowest in over 20 months against the euro.

 

She revealed that the central bank had intervened in the currency market several times to stabilise the baht. Over the past few days, there have been huge capital inflows into the Thai market.

 

In addition to the new measure to control speculative inflows, Nitaya said the central bank would also urge banks not to issue bonds to non-residents.

 

Over the past few days, non-residents, who are speculators, have sold and bought back bonds from banks for huge amounts. With this transaction, speculators lend baht to banks that then issue bonds to them. Non-residents commit to sell back the bonds to the banks within a short period.

 

Pongpen also said that selling and buying back bonds was similar to an earlier transaction, whereby non-residents would sign a repurchase agreement with banks for the extension of baht loans to these banks.

 

"We would ask banks to cooperate in this issue as well," she said.

 

Pongpen said there were several forms of baht speculation. Some speculators have parked their money in non-resident accounts in order to withdraw them after the baht appreciates, while others just speculate on the baht by buying the Thai currency in the morning before selling it in the afternoon.

 

Some invest in bonds or the stock market before selling the bonds and stocks later.

 

"We can figure out that they are speculators only by seeing their names," she added.

 

Anoma Srisukkasem

 

The Nation

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Baht 'will remain strong' for months

(TNA)

[PattayaMale]

Could someone help me understand this. Lets say I have a million baht which I earned in Thailand as Thai baht and put it into a Thai savings account. When I go to the US, I could buy dollars here in Thailand and will have made money on the exchange?