Exporters to meet BOT chief to voice concerns over baht's appreciation

[webfact]

Exporters to meet BOT chief to voice concerns over baht's appreciation

By The Nation

 

Some businesses have suffered losses from the unfavourable exchange rate and many struggle to make profits, he said, adding that manufacturers could not increase production because of drop in orders,Visit Limluecha, vice-chairman of the TNSC, a club of Thai exporters, says.

 

Executives of the Thai National Shippers’ Council (TNSC) will on Tuesday hold a press conference to present their assessment of the impact of the strengthening baht on the country’s exports this year, Visit Limluecha, vice-chairman of the TNSC, a club of Thai exporters, said.

 

The assessment will take into account the adverse impact of the baht appreciating to between Bt29-Bt31 to the dollar. The private sector is concerned about the baht appreciatimg to Bt29 in the beginning of this year, he said.

 

“We previously expected that the baht would not appreciate further, because it could erode our competitiveness and cause us to loose export markets to our competitors,” he said.

 

The baht has been the strongest currency in Asia and it ranks fourth among the strongest global currencies, he said.

 

Over the past two years of the strengthening baht, Thai exporters have lost about 17 per cent of total export value, he said.

 

Some businesses have suffered losses from the unfavourable exchange rate and many struggle to make profits, he said, adding that manufacturers could not increase production because of drop in orders, according to Visit. 

 

The government recently set up a committee to look into the issue of the baht's appreciation. However, they could not implement any effective measures as power was in the hands of the central bank, he complained. The Bank of Thailand (BOT), however, said earlier that the baht had moved beyond the Bt30 level during the New Year holidays because of the thin market and it retreated when the market returned to normal on January 2.

 

Exporters will meet with central bank governor Veerathai Santipraphob on Friday (January 10) to discus about the issue of the baht's appreciation, he said.

 

The private sector would like the baht to stay around Bt31 to the dollar, or stay close to the value of competitors' currencies, he said.

 

“We’re concerned very much that the baht may appreciate further and surpass the Bt29 level, that would severely hurt Thai exports and the country’s competitiveness.”

 

Meanwhile, Siam Commercial Bank’s Economic Intelligence Centre (EIC) forecast that the baht would appreciate to 29.5-30.5 by the end of this year.

 

The EIC believed that there were many factors behind the baht's appreciation this year. However, the pace of strengthening may not be as fast as last year’s, said the EIC.

 

The baht averaged 31.05 per dollar last year, or up 4.1 per cent from 2018.

 

The baht’s Nominal Effective Exchange Rate was 123.2 last year, or up 6.6 per cent from 2018.

 

The research centre expected Thailand to continue to have a high current account surplus this year, about 6 per cent of GDP, compared with 6.3 per cent of GDP last year. Factors driving the current account surplus include flat exports and imports, expansion of tourism, and weak investment. Combined with high international reserves, the baht has been a regional safe haven currency and demand is high among investors.

 

The impact of the US-China trade deal would lead to funds inflows into emerging markets including Thailand. The dollar is expected to weaken during the global recovery then it would indirectly boost the baht value relatively. However, the weakness of the dollar is not much as the US Federal Reserve would keep its policy rate unchanged this year, while the European Central Bank and the Bank of Japan are expected to further ease their monetary policies leading to a relatively weaker euro and yen.

 

The BOT has limited tools to deal with the baht appreciation because it cannot cut the policy rate any further as it is already at a historic low at 1.25 per cent. Moreover the BOT could not intervene much in the exchange rate market because it fears that the United States may accuse Thailand of being a currency manipulator.

 

The Chinese yuan is on a rising trend after the US and China reached an agreement on the first trade deal. This will pull the Thai baht up too, said the EIC.

 

However, there are factors that could limit the pace of the baht's strengthening. Thai corporates are likely to invest more abroad due to slower economic growth in the country. Thai investors are also encouraged to invest more in foreign financial assets. As risk of the global economy reduces, it may cause gold prices to reduce or not increase much this year, which will lessen pressure on the baht, compared with last year when gold price rose high. Thai investors sold gold for profit and exchanged for the baht, the EIC said.

 

“The conclusion is that the baht is strengthening and would continue the trend this year, but the pace of the appreciation may be smaller than last year’s,” the EIC added.

 

Source: https://www.nationthailand.com/business/30380176

 

-- © Copyright The Nation Thailand 2020-01-06

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[ozz1]

Let's change the deck chairs on the titanic so it looks good when it goes down lol

[saengd]

15 minutes ago, ozz1 said:

Let's change the deck chairs on the titanic so it looks good when it goes down lol

So what would you do if you were them?

[RichardColeman]

3 hours ago, webfact said:

The BOT has limited tools to deal with the baht appreciation because it cannot cut the policy rate any further as it is already at a historic low at 1.25 per cent.

Why ? UK and most other places have been at .25% or less for about a decade ! These days you'll be lucky enough to get a Starbucks coffee once a year with your interest

[saengd]

3 minutes ago, RichardColeman said:

Why ? UK and most other places have been at .25% or less for about a decade ! These days you'll be lucky enough to get a Starbucks coffee once a year with your interest

The BOT base rate targets inflation that is intended to be in the range of 1%-4.5%, currently inflation is below the minimum. Cutting the lending rate any further would worsen that. 

[metisdead]

A post containing some charts from an unattributed source has been removed.  Please include a link to your sources as per this forum rule:

 

14) You will not post any copyrighted material except as fair use laws apply (as in the case of news articles). Please only post a link, the headline and the first three sentences.
 

[saengd]

If you look at the volume of gold sales in Thailand in the attached link you'll see there was substantial activity during 2018 and 2019 and that this coincides with a strong USD/THB rate. I did produce screen grabs of those graphs but now you'll have to click on the link yourselves, use the 5 year timeframe to see the effect.

 

https://goldprice.org/gold-price-thailand.html

https://www.xe.com/currencycharts/?from=USD&to=THB&view=5Y

 

[tonray]

36 minutes ago, saengd said:

The BOT base rate targets inflation that is intended to be in the range of 1%-4.5%, currently inflation is below the minimum. Cutting the lending rate any further would worsen that. 

Wouldn't cutting the lending rate incease inflation rate ?

[saengd]

30 minutes ago, tonray said:

Wouldn't cutting the lending rate incease inflation rate ?

It would on my planet, apparently not on this one! 

 

I think what it does is increases borrowings which is what they hope to avoid, exactly what it would do to inflation here in not clear to me at least. I think the fear must be that with inflation so low that if they cut the rate any further (it is at a historical low) there would be no basis to increase the rate again if borrowings did pick up and inflation didn't. Anyway, the previous rate cut was targeted at inflation, perhaps they're waiting to see what effect that has.

[Isaan sailor]

At least some people believe the Baht needs a downward adjustment.  Nobody cares about expats—we get that.  Maybe they will listen to their industry captains.

[saengd]

1 minute ago, Isaan sailor said:

At least some people believe the Baht need a downward adjustment.  Nobody cares about expats.  Maybe they will listen to their industry captains.

Or...it might be that exporters are afraid of losing their gravy train and clearly excess profits, it might just be that the current level is correct according to fundamentals....maybe.

[BestB]

4 hours ago, webfact said:

The private sector would like the baht to stay around Bt31 to the dollar, or stay close to the value of competitors' currencies, he said.

Really? So all the fuss over 1 baht ?

[saengd]

Exports represent 60% of Thai GDP or USD270 bill.

 

One baht difference means billion of baht. 

[hotchilli]

5 hours ago, webfact said:

Some businesses have suffered losses from the unfavourable exchange rate and many struggle to make profits, he said, adding that manufacturers could not increase production because of drop in orders

But everything in the gardens rosy for some !!

2020 the worm will turn if the baht doesn't drop in value!

[RichardColeman]

The rich vs tradesmen ? One winner there

[Isaan sailor]

Good luck to those titans of Thai industry. We expats feel your pain.

And a quick look at currency markets today reveals a slight rise in the Baht (no surprise) and a slight rise in the Chinese Yuan.  The patterns vs. USD are inverted as usual.  Hot money rules at Bank of Thailand.

[Srikcir]

On 1/6/2020 at 3:45 AM, webfact said:

The BOT has limited tools to deal with the baht appreciation because it cannot cut the policy rate any further as it is already at a historic low at 1.25 per cent.

Passing the historic low would require an economic decision but not to do so would be a political decision - lose face for the Prayut regime. Thus, BOT's monetary rate policy seems to have become driven by concern for the reputation of the current regime rather than for the economic survival of the Thai people in general.

[Srikcir]

On 1/6/2020 at 3:45 AM, webfact said:

However, they could not implement any effective measures as power was in the hands of the central bank, he complained.

The BOT has been operating for almost eight decades and it's only now that the government discovers BOT"S authority? There is an appropriate complaint to be made about effectiveness but the accuser might well be the accused.

[Mavideol]

On 1/6/2020 at 3:45 AM, webfact said:

Over the past two years of the strengthening baht, Thai exporters have lost about 17 per cent of total export value, he said.

man they are slow.... it took them 2 years to start worrying, we have been saying it for quite some time already and nobody listen