Central bank panel ready to take more action to deal with rising baht

[webfact]

Central bank panel ready to take more action to deal with rising baht

By The Nation

 

Titanun Mallikamas, assistant governor of the BOT's Monetary Policy Group, stated that the MPC had maintained the expansion rate of the Thai economy would be lower than the previous forecast.

 

The Monetary Policy Committee (MPC) of the central bank said it stands ready to use policy tools as appropriate and monitor structural problems which should be firmly addressed by all related parties.

 

The statement was made on Tuesday (January 7) at the central bank and analysts' meeting at the Bank of Thailand (BOT)'s headquarters amid rising concerns over the baht's exchange rate moving beyond economic fundamentals.

 

Titanun Mallikamas, assistant governor of the BOT's Monetary Policy Group, stated that the MPC had maintained the expansion rate of the Thai economy would be lower than the previous forecast. 

 

However, the global economic outlook has started to stabilise. As a result, Thai exports and economic growth will tend to improve in 2020, he said.

 

Furthermore, an accommodative monetary policy during the recent period will support economic growth and bring the rise of headline inflation towards the targeted rate. 

 

The committee will monitor economic growth, inflation, and financial stability as well as associated risks, in deliberating monetary policy going forward. 

 

The committee said it stands ready to use policy tools as appropriate.

 

The committee expressed concerns over the appreciation of the baht against trading partners and competitors’ currencies even though the appreciation of the baht has slowed down and recently, its movement has been more two-way.

 

Therefore, the committee suggested closely monitoring exchange rates and capital flows amid elevated external uncertainties as well as the effectiveness of the relaxation of foreign exchange regulations to encourage capital outflows. It will also assess the necessity of implementing additional measures.

 

The overall Thai financial system is stable but it has continued accumulating vulnerabilities because of an economic slowdown and the prolonged low interest rate. The committee believed that the policy interest rate as well as microprudential and macroprudential measures should be applied in controlling the risk to the stability of the financial system.

 

The committee thinks that the Thai economy is facing structural problems which should be firmly addressed by all related parties. In the labour sector, for example, the emergence of the ageing society has reduced the number of working population. 

 

More businesses replaced human labour with automation. Employment has been more of outsourcing and sub-contracting. Workers from these kinds of jobs are less stable and endowed with less welfare than the permanent worker. Moreover, it is more difficult for laid-off workers to return to the labour market, especially aged and skills-mismatch workers. 

 

In the investment sector, the continued increase in the current account surplus reflects the structural problem: there is high savings but low investment, especially in the business sector. 

 

Compared to other countries, the Thai investment rate is lower although the savings have continually increased. Therefore, we should encourage both public and private investment which will increase economic growth in the short term and enhance the potential of economic growth in the long term, added the statement.

 

Source: https://www.nationthailand.com/business/30380232

 

-- © Copyright The Nation Thailand 2020-01-08

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[daveAustin]

Well done, but watch you don't get rapped by the Americans in the name of 'currency manipulation'. ???? 

[bluesofa]

2 hours ago, webfact said:

Central bank panel ready to take more action to deal with rising baht

This seems to becoming a weakly weekly statement now, but nothing has changed.

If it carries on like this, it could well be on a par with TAT and tourist numbers.

[ThailandRyan]

Here is a real question for all you financial money folks.  What would the end result be if the government had to devalue the THB?  Currency manipulation is definitely happening somewhere along the lines.

Edited January 7, 2020 by ThailandRyan

[fruitman]

28 minutes ago, bluesofa said:

This seems to becoming a weakly weekly statement now, but nothing has changed.

If it carries on like this, it could well be on a par with TAT and tourist numbers.

Yes they're saying this for a long time now and the baht is still far too strong....

[saengd]

3 minutes ago, ThailandRyan said:

Here is a real question for all you financial money folks.  What would the end result be if the government had to devalue the THB?  Currency manipulation is definitely happening somewhere along the lines.

If the underlying cause of the problem is not resolved first, devaluation would only give everyone more Baht in exchange foreign currency. That would cause even more foreign currency to be introduced and cause the Baht to strengthen even further. Simply put, devaluation wouldn't work.

[saengd]

FWIW I've never believed that currency manipulation is taking place, those that claim it is certainly have never demonstrated how or by whom, any theory such as hot money inflows has been debunked and shown not to be possible. Some claim incorrectly that there is an inverse relationship between THB and RMB, the problem with this theory is that RMB is hard pegged to USD and moves inline with the Dollar, THB does not.

 

It's important to remember that there are always two halves to any currency pair, in the case of Thailand the other half is USD. Any movement in the value of USD has an effect on the value of THB since BOT operates a managed floating peg scheme that is targeted at the value of USD (and a basket of ASEAN currencies).

 

I do accept there may be a link between the value of THB and gold sales in Thailand, the volume of gold sales in Thailand has increased hugely since 2018 and appears to correlate with the rise of THB. The gold market here has grown substantially as people have gone in search of yield, whether that growth is local or imported money is not clear, it is however clear it is not money from the foreign currency reserves since that is highly visible and is accounted for publically every week.

 

EDIT TO ADD: In thinking about the currency that is used to buy gold in Thailand I conclude it must be domestic demand rather than overseas demand hence the currency used must be THB. If it were foreign currency that was used it would have to be exchanged for THB and it would end up in the BOT foreign currency reserves which would show a substantial increase....they haven't.

Edited January 7, 2020 by saengd

[RotBenz8888]

3 hours ago, webfact said:

However, the global economic outlook has started to stabilise.

Right..like the Middle East tensions won't affect Thailand...

[legend49]

1 hour ago, bluesofa said:

This seems to becoming a weakly weekly statement now, but nothing has changed.

If it carries on like this, it could well be on a par with TAT and tourist numbers.

Yes ALL talk NO action.

[sammieuk1]

Sounds like the MPC plan is to talk the market to sleep and hope no one ever notices the baht is actually worthless????

[saengd]

2 minutes ago, legend49 said:

Yes ALL talk NO action.

What action would you take?

[1FinickyOne]

1 hour ago, ThailandRyan said:

What would the end result be if the government had to devalue the THB?

Then the baht would be devalued..?? what are you trying to ask here? 

[blazes]

 

Strong baht good for hi-so punters.  Lots of lovely property available in nice clean European countries where ordinary people believe in the rule of law and stop for pedestrians to cross the road....

[Sticky Wicket]

It makes Swiss hotels particularly cheap.

How wonderful

[ThailandRyan]

17 minutes ago, kenk24 said:

Then the baht would be devalued..?? what are you trying to ask here? 

I was asking what the result would be to the baht vs. other currencies and on the economy here.

[Sticky Wicket]

https://thailand.opendevelopmentmekong.net/news/bot-starts-siege-on-hot-money-flows/

 

[JAG]

9 minutes ago, Sticky Wicket said:

It makes Swiss hotels particularly cheap.

How wonderful

And so convenient if you live " just down the road (autobahn)."

[Sticky Wicket]

They are manipulating it because it isn't allowed to float and has a lot of restrictions.

Those factors alone mean that the BOT has control over the currency

 

[saengd]

1 minute ago, Sticky Wicket said:

https://thailand.opendevelopmentmekong.net/news/bot-starts-siege-on-hot-money-flows/

 

That was in July last year!

[Sticky Wicket]

Just now, saengd said:

That was in July last year!

yeh but you said it had been debunked.

Moves to counter doesn't mean it has stopped either

Edited January 8, 2020 by Sticky Wicket

[saengd]

Just now, Sticky Wicket said:

yeh but you said it had been debunked

It has! 

 

And BOT operates a managed floating peg, just like 87 other countries in the world.

[Sticky Wicket]

Those foreign reserves are being held high for a reason too

[Sticky Wicket]

One thing that would really hurt Thailand is higher oil prices, which look like they are on their way!

[Isaan sailor]

I’d still like to know why the Viet Dong remains stable—yet the Baht gyrates out of control every day...

[1FinickyOne]

4 minutes ago, ThailandRyan said:

I was asking what the result would be to the baht vs. other currencies and on the economy here.

ok - if the baht were devalued agst your currency, you would get more baht for your peso... as to effects on the economy, maybe there would be some inflation as things like oil and gas would become more expensive and that would effect most products being shipped... I would guess the effects would be proportionate to the amount and % of devaluation... in some businesses there would be price adjustments... 

[MasterBaker]

This with put Thailand on international Currency manipulation list and consequences could be dare.

[Sticky Wicket]

Just now, kenk24 said:

ok - if the baht were devalued agst your currency, you would get more baht for your peso... as to effects on the economy, maybe there would be some inflation as things like oil and gas would become more expensive and that would effect most products being shipped... I would guess the effects would be proportionate to the amount and % of devaluation... in some businesses there would be price adjustments... 

yeh all the imported goodies that haven't been reduced over the last few years with the strong baht would suddenly sky rocket!

[Sticky Wicket]

1 minute ago, MasterBaker said:

This with put Thailand on international Currency manipulation list and consequences could be dare.

I don't think so as it's been strong for a long time now.

It wouldn't be an obvious manipulation

[micmichd]

41 minutes ago, blazes said:

 

Strong baht good for hi-so punters.  Lots of lovely property available in nice clean European countries where ordinary people believe in the rule of law and stop for pedestrians to cross the road....

"nice clean European countries" - where every second country is on the verge of  civil war...

[fulhamster]

8 hours ago, saengd said:

If the underlying cause of the problem is not resolved first, devaluation would only give everyone more Baht in exchange foreign currency. That would cause even more foreign currency to be introduced and cause the Baht to strengthen even further. Simply put, devaluation wouldn't work.

But it's worth a try .... if only for a week while we transfer our funds over????????