Mathee: Wants to shield local firms from harm

The Bank of Thailand on Friday issued a verbal intervention, saying it is ready to rein in the baht if the currency strengthens so rapidly that the private sector is damaged.

The central bank is monitoring the foreign currency market and will act to stem the baht’s rise if the currency gains so quickly that local businesses cannot adjust, said deputy governor Mathee Supapongse.

“Since the beginning of 2018, the baht has strengthened against the US dollar in line with its regional peers, but the pace is relatively fast,” Mr Mathee said. “The stronger baht could be attributed to the dollar’s weakness, coupled with capital inflows to both equity and bond markets in the region.”

The baht is the best-performing Asian currency so far this year, up 1.2% against the greenback, while the Thai stock market got off to a strong start in the first week of 2018 — surging 2.4% from the end of 2017, finishing just shy of the 1,800-point mark and hitting a fresh all-time closing high yesterday.

But foreign investors were net sellers of Thai shares worth 409 million baht in the first week of 2018.

Asian stock markets started 2018 on a strong note amid growing optimism about the global economy. Many stock markets, including the Dow Jones Industrial Average, which finished above 25,000 for the first time, have recorded new highs.

The local currency, which rose by 10% against the dollar last year, was the second-biggest gainer in the region after the South Korean won.

Mr Mathee said the private sector should consider appropriate measures in managing foreign currency risks.

There are various alternatives for currency risk management, he said, including hedging, making payments in currencies that move in line with the baht instead of the dollar, and parking foreign-denominated currencies earned from transactions in a foreign currency deposit account, in case operators are liable to pay foreign debts in the foreseeable future.

Deputy Prime Minister Somkid Jatusripitak on Thursday played down warnings from some foreign research houses that Thailand risks being added to the US Treasury’s watch list of potential currency manipulators, saying the state had not stepped in to curb the baht for some time.

He said small and medium-sized firms must hedge against foreign currency risks, a measure that incurs some costs but is considered an investment.

News Reporter

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