Bot Relaxing Foreign Exchange Rules

[chickencurry]

Just read on ChannelNewsAsia website that quote "BOT said on Mon it would relax foreign exchange rules for some foreign investors for a month, which would also narrow the gap between onshore and offshore THB." unquote

Have scoured this website, Bangkok Post and BOT website and can find nothing. Anyone know what this is about or is ChannelNewsAsia doing some creative writing?

[A_Traveller]

Is in here too but lost in the News clippings.

The Bank of Thailand has further relaxed the capital-control requirement, even as the baht further appreciated to a new 10-year high above the Bt34/US dollar level due to continued inflows to the stock market. The central bank yesterday decided to allow non-residents with non-speculative transactions in Thailand to conduct hedging or sell-buy swaps. The relaxation of the 30-per-cent reserve requirement covers their baht-denominated transactions with local financial institutions. The BOT expects the move will end the recent volatility and narrow the difference in the baht levels between the onshore and offshore markets.

Regards

Nation Link

/edit add quote//

Edited July 10, 2007 by A_Traveller

[wasabi]

Is in here too but lost in the News clippings.

The Bank of Thailand has further relaxed the capital-control requirement, even as the baht further appreciated to a new 10-year high above the Bt34/US dollar level due to continued inflows to the stock market. The central bank yesterday decided to allow non-residents with non-speculative transactions in Thailand to conduct hedging or sell-buy swaps. The relaxation of the 30-per-cent reserve requirement covers their baht-denominated transactions with local financial institutions. The BOT expects the move will end the recent volatility and narrow the difference in the baht levels between the onshore and offshore markets.

Regards

Nation Link

/edit add quote//

I think in the short term it will increase volatility because they keep flip flopping. However long term relaxing these controls should be good for the country to facilitate trade. I know many big investors were spooked by the excessive controls.

[ThaiLover1]

The gap between onshore and offshore baht exchange rates is getting narrow:

http://www.tmcnet.com/usubmit/2007/08/15/2864853.htm

[xbusman]

If I were to guess, I think they are running out of the will and/or the money to keep supporting the baht. I read somewhere recently where BOT has burned through 9 billion baht trying to support it, often against their own banks which I bet really pissed them off.

Just some guesses backed up by sketchy reports out of local newspapers.

Corporate profits are down, NPLs are up, private consumption is way down. Where does the government get its money? From collecting VAT on private consumption and businesses. There is no income tax here to speak of, and anyone making over 180 baht a day knows how to dodge those taxes anyway. No capitol gains taxes, well at least that anyone pays, no corporate tax because 90% of the corporate books are purposefully murky to avoid tax. No property tax to speak of. I think they get 90% of their revenue from VAT and property transfers. We have to assume that tax collection this year is falling like a rock as businesses and consumers slow down and property sales slow.

Add to this mix that Thaksin did a great job of spending money leaving the bill to come due some time in the future ( that is after all a politicians job in life) and we now have national health insurance, OTOP loans, and a variety of new government schemes to pay for like Elite card and Suvarnabhumi.

Then realize that it is the new governments intention to salvage GDP and keep the economy on track by massively increasing government spending, at what point does the money needed to support the baht become a little thin?

They have done a good job of cranking up the Government spending in some areas but money has been very very tight in the budget. I read this news as meaning the BOT is throwing in the towel on supporting the baht but I bet they are not doing it voluntarily.