Float Of Chinese Yuan To Benefit Thailand

[george]

Managed float of yuan to benefit Thai and global economies:BOT

BANGKOK: -- The managed float of the Chinese currency, announced yesterday by Beijing, will not affect Thailand's financial system, but benefit the Thai and global economies as a whole in the long run, according to the Bank of Thailand (BOT)'s Governor, M.R. Pridiyathorn Devakula.

M.R. Pridiyathorn said in a statement urgently issued here after the Chinese government's announcement of the managed float of the yuan that the BOT supports the move, saying it was the right decision suitable for the global economic condition currently.

"The decision will not only benefit the Chinese economy, but also other economies globally, as it will eventually stabilize regional and global exchange rates and balance the world economy", the BOT's chief said.

"The Chinese yuan was previously weaker than it should be. But its managed float against a basket of major currencies, instead of being pegged to the US dollar solely, will, from now on, allow the Chinese currency to move in the same direction of many currencies", he noted.

Beijing decided to apply to the managed float of the yuan yesterday, making the Chinese currency initially appreciate by 2.1 percent against the US dollar, from 8.28 yuan to 8.11 yuan a US dollar. It was the yuan's first appreciation in 10 years.

M.R. Pridiyathorn pointed out that the decision would make other currencies in Asia, including the Thai baht, move towards the normal track although they would be stronger accordingly.

The Thai baht has appreciated to around Bt41.26 a US dollar now, from Bt41.79 a US dollar, since just two hours after the Beijing's decision, according to the central bank's chief.

The appreciation of the Thai currency by only 1.27 percent, which is far less than that of the yuan, would benefit Thai exports to the Chinese and other world major markets, M.R. Pridiyathorn and other analysts said yesterday.

The central bank's chief confirmed that the BOT had prepared measures to cope with any impacts on the Thai economy from the stronger yuan and a possible fluctuation of regional currencies in the short run.

Sompop Manarangsan, a wellknown economist and lecturer at the Faculty of Economics, Chulalongkorn University, told TNA that the fluctuation of regional currencies was anticipated in the short term due to speculations for profit takings of the yuan by currency traders.

He joined many other economic analysts in saying that Beijing's decision yesterday was a good sign for Thai exports and the world economy as a whole, and that Washington was believed to continue to press Beijing for a further appreciation of the yuan in the future.

The United States reportedly wants the Chinese currency to be stronger by around 10 percent to help ease the US current account deficit problem, while analysts had expected that the yuan would appreciate by 3-5 percent.

With the stronger trend of regional currencies, Finance Ministry Spokesman Somchai Sajjaponse warned, however, that Thai exporters should boost their competitiveness and business potential against rivals through further improving and developing their products to be recognized as best quality ones in international markets.

Meanwhile, Deputy Prime Minister and Finance Minister Somkid Jatusripitak is scheduled to call an urgent meeting of the government's economic team here today to discuss and assess any impacts of the stronger yuan on the Thai economy, with measures to deal with the impacts expected.

--TNA 2005-07-22