Baht’s rise due to continuous current account surplus: BOT

By THE NATION

 

Mathee Supapongse

 

The Bank of Thailand (BOT) has intervened in the foreign exchange markets to rein in the rising baht, which had resulted in purchase of 80 billion US dollars over the past five years.

 

The BOT vowed to take more action if needed and urged other agencies to jointly tackle the appreciation of the currency.

 

The BOT is closely monitoring the baht’s value, Mathee Supapongse, deputy governor of monetary stability, revealed on Tuesday (January 14), adding it was due to structural problems.

 

He said the baht’s appreciation, especially in the second half of last year, was caused by Thailand’s current account surplus.

 

The current account surplus resulted from higher revenue coming from exports and tourism compared to outflows for imports.

 

Mathee added that the current account surplus was not a result of short-term speculation by foreign investors.

 

Previously, the BOT had slowed down the baht's appreciation by purchasing dollars and selling the baht. This operation increased Thailand’s foreign exchange reserves continually.

 

In the past five years, Thailand’s exchange reserves increased US$80 billion. “If the BOT did not manage the appreciation, it would have been more severe than at present,” Mathee added.

 

However, the BOT saw the baht appreciation as a structural problem from continuous current account surplus and the low rate of foreign securities investment.

 

“Appreciation management, as well as other short-term financial measures, were necessary for the current economic situation,” the deputy governor added.

 

He concluded that the issue of the baht’s appreciation needed collaboration from relevant agencies, pointing out that there were numerous ways to cope with the problem.

 

“We should increase our imports of infrastructure and machinery to improve Thailand’s production, at a time when the baht is appreciating,” he said. “Also, relevant agencies should reduce the baht’s purchasing strength in the export sector, by keeping Thai revenue in foreign currency deposits.”

 

Source:  https://www.nationthailand.com/news/30380539

 

-- © Copyright The Nation Thailand 2020-01-14

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4 minutes ago, webfact said:

numerous ways to cope with the problem.

But as usual, it's better to wait.

27 minutes ago, webfact said:

“We should increase our imports of infrastructure and machinery to improve Thailand’s production, at a time when the baht is appreciating,” he said.

And perhaps reduce tariffs???

49 minutes ago, webfact said:

The current account surplus resulted from higher revenue coming from exports and tourism compared to outflows for imports.

Given the apparent very low tourist numbers, does this mean both the tourists spent trillions of Baht each?

 

Edited January 14, 20206 yr by bluesofa
posting error

38 minutes ago, zydeco said:

And perhaps reduce tariffs???

I wish! And start with wine.

Thai central bank says ready to curb resilient baht if needed

By Kitiphong Thaichareon, Orathai Sriring

 

FILE PHOTO: New baht banknotes featuring Thailand's King Maha Vajiralongkorn are unveiled during a news conference at Bank of Thailand headquarters in Bangkok, Thailand, July 3, 2018. REUTERS/Athit Perawongmetha

 

BANGKOK (Reuters) - Thailand's central bank is still concerned about the strength of the baht THB=TH and is ready to take further action if necessary, a deputy central bank governor said on Tuesday.

 

The baht’s gains have been driven by the country’s large current account surplus, and not speculation in the currency, Mathee Supapongse told a news briefing.

 

“We have a lot of weapons ready, but there is no speculation from foreign investors yet,” he said, adding the central bank was monitoring the market closely.

 

As Asia’s best performing currency in 2019, the baht rose nearly 9% against the dollar, putting more pressure on the export-dependent economy amid global trade tensions and markets are concerned the authorities will introduce capital controls, among other steps.

 

The baht traded at 30.24 per U.S. dollar at 0510 GMT.

 

Rising international reserves show the Bank of Thailand (BOT) has closely managed the baht by buying dollars, Mathee said. The reserves increased by $18 billion to $223 billion in 2019.

 

“If the BOT had not intervened, the reserves would not have risen and the baht may have been stronger than this,” he said.

 

But the central bank is mindful of side-effects and limitations of currency intervention, as it may face trade protagonist measures from other countries, he said.

 

On Monday, the U.S. Treasury said Thailand was close to triggering thresholds to be added to its currency monitoring list.

 

Mathee also said quantitative easing was not suitable for Thailand due to very high liquidity and it would largely benefit certain business groups.

 

The central bank will further relax rules to spur outbound investment to help ease upward pressure on the baht, he said.

 

Last year, the BOT introduced steps against short-term speculative inflows and relaxed rules to spur fund outflows in a bid to curb the baht’s strength.

 

In November, the central bank said within the next three months the limit exporters can keep proceeds abroad will be raised to $1 million per lading bill from $200,000 currently. Such proceeds account for about 80% of all exports.

 

While the baht’s appreciation has affected the economy by hurting export competitiveness, it has benefited importers and companies and individuals with foreign debt, he added.

 

The central bank has forecast Southeast Asia’s second-largest economy will expand 2.8% this year after growing by an estimated 2.5% in 2019, a five-year low.

 

-- © Copyright Reuters 2020-01-14

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1 hour ago, snoop1130 said:

ready to curb resilient baht if needed

So they think in the present it is not needed?

Delusion, real  or pretended

Edited January 14, 20206 yr by sweatalot

Wild suggestion: remove import taxes. Will balance in no time. Never mind your local low quality produce won't be able to compete, somnamnaa.

Edited January 14, 20206 yr by DrTuner

Blah blah Rome is burning whilst the rich men are fiddling rinse and repeat over and over until the economy is toast then millions of super rich Vietnamese will be touted by TAT as the next saviors ????

The Parrot speaks once again, like a worn out record with the needle jammed !

BOT not keen on sovereign wealth fund in baht fight

By The Nation

 

Deputy Bank of Thailand governor Mathee Supapongse, says the proposal of a sovereign wealth fund will not help in reining in the baht's value.

 

The central bank has ruled out a proposal for the establishment of a sovereign wealth fund but promises to further relax capital outflow rules in tackling the strengthening baht.

 

Deputy Bank of Thailand governor Mathee Supapongse, said the proposal of a  sovereign wealth fund will not help in reining in the baht's value. “If the fund will just facilitate changing asset holding, for example from dollar and US bonds to oil, it would not have any impact on the baht's value”.

 

However, if the government and private sector buy dollar in foreign markets for investment overseas, it would weaken the baht, he added.

 

The baht appreciated about 8 per cent against the US dollar last year. It has been moving around at Bt30 a dollar this month, and at this level there was almost no change from last year.

 

The Thai currency occasionally weakened by 1 per cent against other appreciating currencies in the region, he said, adding that there is no need to implement drastic measures to deal with the baht's value.

 

Thailand’s current account surplus stands at 8 per cent of GDP, Taiwan 13.3 per cent and South Korea 5.2 per cent. Taiwan and South Korea have encouraged exporters not to bring dollar back into the countries and they also manage their exchange rate better, he noted.

 

The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht. It has called for cooperation from other state agencies to jointly tackle the issue. 

 

The central bank has discussed the matter with the Office of Insurance Commission which regulates many funds, said Mathee. The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said.

 

The central bank previously had relaxed capital outflow rules including allowing individual investors to directly invest in financial asset overseas. However, many critics said those measures were not effective.

 

They said the central bank may find relief soon with the US lifting China off the list of currency manipulators on Monday. The central bank has been cautious in market intervention by selling baht and buying dollar, due to US pressure.

 

Even so, the BOT bought $80 billion over the past five years, leading to a large accumulated international reserve of $227.5 billion, as of January 3.

 

Source: https://www.nationthailand.com/business/30380559

 

-- © Copyright The Nation Thailand 2020-01-15

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"The central bank may further relax capital outflow rules to make it much easier for these funds to invest overseas, he said".

 

This doesn't seem to have much effect, Thai exporters want to hold Baht not Dollars plus overseas investments don't seem to be their thing (except corporate investment). Many posters will automatically think this will mean they can transfer money out of Thailand more easily, it doesn't, nothing will change when it comes to transactions by foreigners, only those by Thai nationals.

 

"The central bank has blamed the country's high current account surplus and low domestic investment as main causes of the strong baht". 

 

Driving around the North yesterday I was struck by how much construction work is underway, new major road expansions (Chiang Mai/Lamphun), two new large hospitals/buildings Lamphun & San Sai, new court houses (Lamphun/Lampang), new airport planned (Chiang Mai) government is spending money and building out infrastructure, if this is being repeated elsewhere in the country the government is investing huge amounts of money in the economy.

 

17 hours ago, webfact said:

He concluded that the issue of the baht’s appreciation needed collaboration from relevant agencies, pointing out that there were numerous ways to cope with the problem.

Seems like a great time to buy a few subs and military hardware to me

Is this a new story or just a rehashed one from the week before and the week before that and the week before that and on and on.

4 hours ago, saengd said:

 

 

 

 

 

Driving around the North yesterday I was struck by how much construction work is underway, new major road expansions (Chiang Mai/Lamphun), two new large hospitals/buildings Lamphun & San Sai, new court houses (Lamphun/Lampang), new airport planned (Chiang Mai) government is spending money and building out infrastructure, if this is being repeated elsewhere in the country the government is investing huge amounts of money in the economy.

Is that Thai govt. investing in economy or Chinese investments. As far as I can see it is the Chinese money flooding into Thailand that is inflating the baht not fundamentals. Sustainable if the Thai government is also borrowing heavily from Chinese?  I hope not. 

8 minutes ago, morrobay said:

Is that Thai govt. investing in economy or Chinese investments. As far as I can see it is the Chinese money flooding into Thailand that is inflating the baht not fundamentals. Sustainable if the Thai government is also borrowing heavily from Chinese?  I hope not. 

The short answer is the Thai government investing in Thai infrastructure.

 

The Chinese government is highly unlikely to be spending money on Thai infrastructure such as new roads, hospitals and the like, why would they invest in Thai roads?

 

The Baht only inflates in value if it is bought where USD is sold because the Baht tracks USD. The Chinese currency is RMB which when sold for THB does nothing for the USD/THB exchange rate hence no flood of inbound Chinese RMB will change the value of the Baht.

 

If foreign currency enters the country it ends up in the foreign currency reserves in the BOT and these are highly visible hence any new large amounts would be easily seen. Also, the current trade surplus reconciles back to the increase in the foreign currency reserves each month so it does not appear that there is excess unaccounted for foreign currency in the system.

 

What's confused you deej and I'll try to explain it, what don't you understand?

The US trade war with china is driving billions of dollars in capital investment to Thailand. Chinese manufactures are allowed to move production, that supports sales to the US, outside of china. Thailand with their infrastructure are the winners. This currency is going to remain strong.

3 minutes ago, Five and Nine Bkk said:

The US trade war with china is driving billions of dollars in capital investment to Thailand. Chinese manufactures are allowed to move production, that supports sales to the US, outside of china. Thailand with their infrastructure are the winners. This currency is going to remain strong.

Yep, nail, head! https://www.ceicdata.com/en/indicator/thailand/foreign-direct-investment

59 minutes ago, saengd said:

The Chinese government is highly unlikely to be spending money on Thai infrastructure such as new roads,

 

Well, the Chinese are building roads everywhere.  Very useful for future invasions I guess.

 

https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative

 

https://www.nationthailand.com/national/30367901

 

In fact the Chines are building stuff everywhere they can. I was in Mae Sot a couple of weeks ago and there were huge numbers of young Chinese crossing over into Burma. Never used to be like this. I asked a Thai immigration official what was going on and he said that they have built a virtual Chinese city over the river on land leased to them by the Burmese government.

 

 

 

19 hours ago, webfact said:

He concluded that the issue of the baht’s appreciation needed collaboration from relevant agencies, pointing out that there were numerous ways to cope with the problem.

Well the population is waiting so get to work boys, while you still have a workforce, an export market and any foreigners!!

13 hours ago, sweatalot said:

So they think in the present it is not needed?

Delusion, real  or pretended

Unconcerned as it suits the mega rich!

3 minutes ago, Denim said:

 

Well, the Chinese are building roads everywhere.  Very useful for future invasions I guess.

 

https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative

 

https://www.nationthailand.com/national/30367901

 

In fact the Chines are building stuff everywhere they can. I was in Mae Sot a couple of weeks ago and there were huge numbers of young Chinese crossing over into Burma. Never used to be like this. I asked a Thai immigration official what was going on and he said that they have built a virtual Chinese city over the river on land leased to them by the Burmese government.

 

 

 

Yes sure, Belt and Road is a huge previously agreed trade project and certainly Chinese funds may be involved. But that's not really the sort of infrastructure roll out that I was describing when I talked about the Lamphun/Chiang Mai highway, if anything that's in anticipation of the new CM airport.

15 minutes ago, saengd said:

Yep, nail, head! https://www.ceicdata.com/en/indicator/thailand/foreign-direct-investment

From all your posts, you seem to revel in the high baht and think it's a good thing.

The long term effects of an export driven country with a high currency are terrible!

You also seem to believe the junta are being completely transparent in their control of the country and that none of this is jiggery pokery off the books

 

Quote

 

 

Edited January 15, 20206 yr by Sticky Wicket

2 minutes ago, Sticky Wicket said:

From all your posts, you seem to revel in the high baht and think it's a good thing.

The long term effects of an export driven country with a high currency are terrible!

You also seem to believe the junta are being completely transparent in their control of the country and that none of this is jiggery pokery , off the books

 

 

^^^^ exactly.  that the very reason. he confuses me????

59 minutes ago, saengd said:

What's confused you deej and I'll try to explain it, what don't you understand?

Well, I'm confused as well. If the THB tracks the USD how is there such a fluctuation between the value of the baht against the USD itself?

 

And if a trade surplus creates a strong baht, the currency strength should then create a reduction in exports and tourism, therefore a smaller surplus and the baht should reduce in value. But this hasn't happened.

 

I am no economist and would love to hear a straightforward, non-confusing explanation.

Edited January 15, 20206 yr by madmitch

18 minutes ago, Sticky Wicket said:

From all your posts, you seem to revel in the high baht and think it's a good thing.

The long term effects of an export driven country with a high currency are terrible!

You also seem to believe the junta are being completely transparent in their control of the country and that none of this is jiggery pokery off the books

 

 

Far from it, I certainly don't revel in it since I'm affected by its strength as much as anyone else. My motivation in posting on this and similar subjects is to try to counter the popular belief that THB is manipulated by one or two individuals in a back room somewhere plus I have a keen interest in economics. I'd really like people to think about the subject and understand better how the system works, that's all.

 

As for government transparency: I'm pretty clear that BOT is independent and that the numbers they produce make sense, they certainly reconcile to each other in every way.  Anyone with a conspiracy theory about what they think could be happening that is slightly untoward should post it for inspection and scrutiny. I'd welcome that.

Edited January 15, 20206 yr by saengd

4 minutes ago, madmitch said:

Well, I'm confused as well. If the THB tracks the USD how is there such a fluctuation between the vaue of the baht against the USD itself?

Good question. The answer is that THB is managed via a floating peg rather than a hard peg, if it were hard pegged the two would move in unison. But the floating peg, commonly known as the dirty peg, for good reason, means that BOT can chose to keep the Baht in the upper part of the range OR that market/economic conditions make that happen regardless. In the current situation it's the economic conditions that are forcing THB into the upper reaches of the range and the trade imbalance is responsible for this. The fluctuations occur because THB is a fairly small currency, dealers refer to it as a boutique currency which requires very little effort or volume to make it move one way or the other, ripples are felt as a result of small hits. For example, the Baht strengthens slightly at month end because that's when most US SSc checks are paid so the sale of USD and purchases of THB have a moving impact.

6 minutes ago, saengd said:

Far from it, I certainly don't revel in it since I'm affected by its strength as much as anyone else. My motivation in posting on this and similar subjects is to try to counter the popular belief that THB is manipulated by one or two individuals in a back room somewhere plus I have a keen interest in economics. I'd really like people to think about the subject and understand better how the system works, that's all.

But with an opaque junta govt there will always be plenty 'off the books'.

Doesn't take much for people to go missing if they don't tow the line!

"We should increase our imports ..."

Of course they should.

But the disincentive is stupidly high import duties , and all sorts of shenanigans by Customs Officers that lead individuals to just give up...

 

While the baht  was skyrocketing in value , laws were passed to  increase the taxes on foreign cars , ban the import of collectable cars , and ban  even spare parts for those already here  ( ! ) and wine volumes recalibrated to a larger tax threshold .

This is the opposite of growing imports !

 

And try and get any  serious money out of the country !

They wont let it happen.