Thai central bank to ease FX rules due to limited scope on rates

 

 

LUANG PRABANG, Laos (Reuters) - Thailand's central bank said on Saturday it would ease rules governing the foreign exchange market and international reserves, giving it more scope to tackle the baht's strength following a series of rate cuts.

 

"The policy rate is low when compared with the region ... will not be able to lower rates much further," Bank of Thailand Governor Veerathai Santiprabhob told reporters, adding that negative interest rates would lead to structural problems.

 

Earlier this month the central bank lowered its one-day repurchase rates to 1.25%, the lowest level since the global financial crisis.

 

The baht <THB=TH> is Asia's best-performing currency this year, rising 7.7% against the dollar, and putting further pressure on exporters already affected by global trade tensions.

 

Veerathai said the central bank would review foreign exchange laws to allow greater flexibility, and to align regulations with new technological developments including digital currencies.

 

Outlining the monetary authority's 2020-2022 strategy, Veerathai said exchange rate volatility was unavoidable because it is closely tied to unpredictable external factors.

 

He added that the central bank would look at how to relax foreign reserve measures and let Thai businesses keep currencies abroad because the country already had sufficient international buffers.

 

Mathee Supapongse, deputy governor for monetary stability, said the central bank was also studying policies that could be deployed through non-financial institutions to directly impact the market. He did not give further details.

 

(Reporting by Kitiphong Thaichareon; Writing by Chayut Setboonsarng; Editing by Helen Popper)

 

-- © Copyright Reuters 2019-11-24

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This was reported 2 weeks ago. Just means HISO's will send more money out of the country, cash in on the better exchange rate , buy properties et all from the profit.

What is amazing is how they (BOT) not even mention once their gigantic way over the top 220+ Bill US$ foreign reserves Thailand is just sitting on. These are huge gigantic sums of uninitialized capital just sitting dormant meant to hold up the Baht currency in times clearly past -but now are doing just the opposite by help strengthening it.  A small portion could be used to induce some change, for example Farm dept forgiveness in exchange for new habits like not burning fires anymore or finding replacement of toxic fertilizers.  A reduction of Thai foreign reserves more then any interest rate talk would help tame the currency' rise which is now blamed for so many problems. Yet never even mentioned, why?

28 minutes ago, legend49 said:

This was reported 2 weeks ago. Just means HISO's will send more money out of the country, cash in on the better exchange rate , buy properties et all from the profit.

If they do that enough it should lower the baht

2 hours ago, rooster59 said:

Mathee Supapongse, deputy governor for monetary stability, said the central bank was also studying policies that could be deployed through non-financial institutions to directly impact the market. He did not give further details.

I'm guessing as he had not thought of any yet

37 minutes ago, thaistocks said:

What is amazing is how they (BOT) not even mention once their gigantic way over the top 220+ Bill US$ foreign reserves Thailand is just sitting on. These are huge gigantic sums of uninitialized capital just sitting dormant meant to hold up the Baht currency in times clearly past -but now are doing just the opposite by help strengthening it.  A small portion could be used to induce some change, for example Farm dept forgiveness in exchange for new habits like not burning fires anymore or finding replacement of toxic fertilizers.  A reduction of Thai foreign reserves more then any interest rate talk would help tame the currency' rise which is now blamed for so many problems. Yet never even mentioned, why?

You’ve got it backwards. A reduction of foreign reserves means sell large amounts of dollars and buy baht. This will strengthen the baht not weaken it. 

32 minutes ago, RichardColeman said:

I'm guessing as he had not thought of any yet

Often such talk alone is enough to lower the FX rates, at least temporarily

29 minutes ago, Crash999 said:

You’ve got it backwards. A reduction of foreign reserves means sell large amounts of dollars and buy baht. This will strengthen the baht not weaken it. 

OK, but alternatively surely Thailand could easily use part of its foreign reserves to buy/purchase foreign equipment/infrastructure materials/services/equipment to build all those foreign made new trains etc, or to pay for other mega purchases infrastructure it plans to makes.  Drawing down some its over the top reserves would send the clear message -and the Baht should weaken a bit.  Is just is soo odd how this is never mentioned by the BOT, or others here.

1 hour ago, legend49 said:

This was reported 2 weeks ago. Just means HISO's will send more money out of the country, cash in on the better exchange rate , buy properties et all from the profit.

Like it or not, currency valuation is supply and demand - selling more will help with THB strength.  Companies doing foreign take-overs, buying products from overseas, or drying up investment money from coming in -- this is what would help weaken... when trying to manage that as a government as a policy... all have upside or downsides. 

Prove me wrong.  Look at the Baht vs USD daily movement chart (or most other western currencies chart) for the last 24 hours.  See the pattern of Baht appreciation.

Now look at the Baht vs Chinese Yuan daily movement for the last 24 hours.  See the Yuan appreciate by a strikingly similar chart pattern—in reverse.

Therefore, if you ever wondered why the Baht goes up, and Bank of Thailand’s USD reserves also rise—you can safely assume the ChiComs have a hand in this.

Consider, its such a big deal anytime anybody here wants to send money abroad. It usually takes at least an hour at the bank counter, a long sheet to be filed out, along with their firm request you give them a copy of a foreign bill or other "evidence" why you want to send funds abroad.  Why is there a why? Is this some kind of BOT requirement? Does this make sense? By making it easier, fast, fair convenient would induce more here buying foreign currency so helping weakening the Baht. Vs. this sticky procedure which has the opposite effect. In place by all Thai banks as far as I know.

15 minutes ago, thaistocks said:

Consider, its such a big deal anytime anybody here wants to send money abroad. It usually takes at least an hour at the bank counter, a long sheet to be filed out, along with their firm request you give them a copy of a foreign bill or other "evidence" why you want to send funds abroad.  Why is there a why? Is this some kind of BOT requirement? Does this make sense? By making it easier, fast, fair convenient would induce more here buying foreign currency so helping weakening the Baht. Vs. this sticky procedure which has the opposite effect. In place by all Thai banks as far as I know.

There is an aversion to sensible in Thailand.  That said it works well for the elite who don’t have to fill out anything.  The current measures you mention were introduced a number of years ago to stop money laundering.

1 hour ago, thaistocks said:

What is amazing is how they (BOT) not even mention once their gigantic way over the top 220+ Bill US$ foreign reserves Thailand is just sitting on. These are huge gigantic sums of uninitialized capital just sitting dormant meant to hold up the Baht currency in times clearly past -but now are doing just the opposite by help strengthening it.  A small portion could be used to induce some change, for example Farm dept forgiveness in exchange for new habits like not burning fires anymore or finding replacement of toxic fertilizers.  A reduction of Thai foreign reserves more then any interest rate talk would help tame the currency' rise which is now blamed for so many problems. Yet never even mentioned, why?

I Think you are a little confused. Holding up the baht is equivalent to supporting or strengthening the baht, not the opposite. As far as farm debt forgiveness is concerned it has been tried before and only incourages farmers to borrow again knowing that they might not have to pay it back. If you think Thais will change their habits in exchange for debt forgiveness you better not buy any lotto tickets. 

58 minutes ago, Isaan sailor said:

Prove me wrong.  Look at the Baht vs USD daily movement chart (or most other western currencies chart) for the last 24 hours.  See the pattern of Baht appreciation.

Now look at the Baht vs Chinese Yuan daily movement for the last 24 hours.  See the Yuan appreciate by a strikingly similar chart pattern—in reverse.

Therefore, if you ever wondered why the Baht goes up, and Bank of Thailand’s USD reserves also rise—you can safely assume the ChiComs have a hand in this.

agree. did similar comparison last week (saturday to saturday) and same outcome

The Thai government has agreed to pay China for the very fast train in US dollars. China insists on being paid in US dollars for most big contracts, including procurements (such as the submarines).

 

It is in the government's interests to keep the baht high to support their capital procurement program.

 

Despite the central banks recent rhetoric (admission that the baht is too high) nothing much will change over the short to medium term. This assumes, of course, that the government can continue to balance an over-valued currency against a deteriorating export sector.

When enough pressure from domestic companies facing closure comes to bear on the government they will start to get the sums right.

At the moment too many populist quick fix schemes are abound trying to keep people happy.

When reality sinks in that real policies need to be in place then maybe we might see the correct changes made!

46 minutes ago, Stevemercer said:

The Thai government has agreed to pay China for the very fast train in US dollars.

Do you have a link or other cite to that effect?

Initially China proposed that Thailand pay in yuans. I never saw any article subsequent that countered that proposal.

In circa 2015 China and Thailand in a trade MOU agreed to use both yuans and baht interchangeably. Payment in yuans to China would avoid currency exchange costs that would cut China's return on its loans or visa versa increase Thailand's loan costs.

Furthermore, Thailand and China have much more control over their own currency value than either would over USD's. That means less currency hedging. Payment of USD's for payment to China for the rail project financing makes no economic sense.

I think I have seen and read this article maybe one week ago and I was very surprised about the agreement that Thailand would pay China in US$ for thus huge project.

 

Just found the article. It is from the 24th of November. Unfortunately cannot post a link (not allowed from this newspaper).

However it states 'The cabinet is expected on Tuesday to approve a proposal to pay for the Bangkok-Nakhon Ratchasima high-speed railway in US dollars in line with a recommendation from China'.

 

 

Nothing improves much in Thailand now. The farmers are unhappy with everything as they get low prices. Families are spending much less and shops are suffering. Property is stuck, hotels suffer and tourism is constantly down. Exporters are fed up. Why  then do they keep baht high? 

Dunno what to say .

at a press briefing one would expect measures,

the thinking about policy goes without saying being part of the job, doesn't it?

 

1 hour ago, Halfaboy said:

'The cabinet is expected on Tuesday to approve a proposal to pay for the Bangkok-Nakhon Ratchasima high-speed railway in US dollars in line with a recommendation from China

Not unusual, why should Chinese builders take a currency risk that is difficult to hedge.

On the other side, if TH has to pay from reserves, some reserves are spent.

3 hours ago, Isaan sailor said:

Prove me wrong.  Look at the Baht vs USD daily movement chart (or most other western currencies chart) for the last 24 hours.  See the pattern of Baht appreciation.

Now look at the Baht vs Chinese Yuan daily movement for the last 24 hours.  See the Yuan appreciate by a strikingly similar chart pattern—in reverse.

Therefore, if you ever wondered why the Baht goes up, and Bank of Thailand’s USD reserves also rise—you can safely assume the ChiComs have a hand in this.

Today is Sunday, there is no FOREX market over the weekend, none of the big players are dealing until Monday through Friday so what you're seeing is an anomaly.

2 hours ago, Stevemercer said:

The Thai government has agreed to pay China for the very fast train in US dollars. China insists on being paid in US dollars for most big contracts, including procurements (such as the submarines).

 

It is in the government's interests to keep the baht high to support their capital procurement program.

 

Despite the central banks recent rhetoric (admission that the baht is too high) nothing much will change over the short to medium term. This assumes, of course, that the government can continue to balance an over-valued currency against a deteriorating export sector.

Do you have a link for that, please?

Just now, saengd said:

Do you have a link for that, please?

 

See post number 18....

"The particulars of the proposed financing structure also appear fairly reasonable. Current Thai government estimates suggest that at least 80 percent of the project will be financed with internal debt denominated in Thai baht, with the rest raised as external debt denominated in U.S. dollars. The government is considering headline interest rates of around 2-3 percent".

 

https://thediplomat.com/2019/03/will-thailands-china-built-railway-be-worth-it/

4 hours ago, hobz said:

If they do that enough it should lower the baht

These people Running the Bank of Thailand are doing it all just for thier pals, yellow shirts, Army, Rich, Royals poor Thailand

This is very good news, I believe it is something like this there is needed to bring the Baht under control.

 

Those folks that were caught for Forex from the big red country were actually being proactive... they were just trying to help out...

What’s really telling: central bank refuses to give details as to where these hot money inflows come from.  All we hear from them is that they keep flowing in, jacking up the Baht, and boosting their USD reserves.

When will they tell us the full details?  This coverup only hurts the Thai economy, and their credibility more and more.

2 hours ago, saengd said:

Today is Sunday, there is no FOREX market over the weekend, none of the big players are dealing until Monday through Friday so what you're seeing is an anomaly.

Not an anomaly.  The latest FX move happened last night—FX open and trading. We woke up to this rate.  And it flatlines on Sunday.