Bank Of Thailand Considers Investing Reserves To Ease Baht

[webfact]

BAHT

BoT considers investing reserves to ease baht

The Bank of Thailand's Monetary Policy Committee has discussed investing the country's huge foreign reserves in a bid to ease appreciation of the baht against the US dollar, a committee member said yesterday.

Praipol Khumsap, a Thammasat University lecturer who sits on the MPC, said he favoured putting the reserves to more use but admitted there was disagreement among committee members. The move would have to be endorsed by the Bank of Thailand (BoT) Court of Directors, he added.

"The reserves are huge," he said. "We discussed this at the MPC meeting but did not reach a unanimous resolution. It's beyond our authority. We can only come up with suggestions and it's up to the Court of Directors."

Thailand's foreign reserves have grown from US$146.8 billion at end-June to over US$170 billion, thanks to huge capital inflows. To rein in appreciation of the baht, the BoT has bought dollars and absorbed huge accounting losses.

The Finance Ministry has called for the BoT to use the reserves to buy zero coupon bonds. They would be issued by the ministry, which would use the proceeds to finance mega-projects. The projects would require imports which would slow down baht appreciation.

But BoT Governor Prasarn Trairatvorakul is apparently reluctant to pursue the strategy. He said inflows are huge but the bank's priority is stability.

Other Asian countries like China and Singapore have set up sovereign wealth funds to cash in on inflows.

The BoT's Court of Directors met yesterday, though foreign reserves were reportedly not discussed. The top issue was the approval of the Bt5 billion budget for the BoT's operations in 2011.

As of November 12, foreign reserves stood at US$171.7 billion, sliding from a peak of $172.2 billion over the past week. The latest figure will be announced today and is expected to show a further decline.

Last week foreign investors became net sellers on the stock market as concerns over the Irish debt crisis led them to shift money from high-risk markets to less risky markets like the US. The baht has weakened to almost 30 per dollar as a result.

Economists say the weakening baht gives the MPC a chance to raise the policy rate at its meeting on December 1. Many observers expect an increase of 25 to 50 basis points from 1.75 per cent now, on the grounds that inflation next year could surge beyond target.

Praipol declined to comment on the possibility, saying the MPC has two to three more days to watch the market.

The data keeps changing and inflation may not be as high as expected, he said. Fund inflows are continuing, but the committee has yet to monitor the magnitude.

Praipol said the MPC also discussed the so-called Tobin tax on capital inflows. The measure may be unnecessary now the baht has begun to weaken against the dollar, he said.

The central bank will take into account the movement of regional currencies. If the baht strengthens in line with regional currencies, the measures will not be necessary, he said.

-- The Nation 2010-11-26

[MYKTHEMIN]

Don't hold your breath, too many with their noses in the trough!

[brahmburgers]

The Bank of Thailand's Monetary Policy Committee has discussed investing the country's huge foreign reserves

I'm not a foreign reserve, not even a foreign preserve (or jam or jelly, for that matter). I am, however, a foreign prevaricator - does that qualify me for getting an investment of one or two billion baht? ....just wondering.

[whybother]

Don't hold your breath, too many with their noses in the trough!

I suppose whatever they did, someone is going to blame them for having their noses in the trough. Probably true too, either way they go.

[Pib]

Last week foreign investors became net sellers on the stock market as concerns over the Irish debt crisis led them to shift money from high-risk markets to less risky markets like the US. The baht has weakened to almost 30 per dollar as a result.

Economists say the weakening baht gives the MPC a chance to raise the policy rate at its meeting on December 1. Many observers expect an increase of 25 to 50 basis points from 1.75 per cent now, on the grounds that inflation next year could surge beyond target.

Yes, yes, using the "long term trend of a whole week" this recent baht depreciation provides plenty of proof the interest rate can be increased without affecting the baht valve.

The data keeps changing and inflation may not be as high as expected, he said. Fund inflows are continuing, but the committee has yet to monitor the magnitude.

Asleep at funds inflow monitoring wheel, but their periodic meeting does allow this policy committee the chance to have a nice luncheon get-together with the tab picked up by govt.

[webfact]

Baht likely to reach 26-27 to US dollar next year: UTCC forecast

BANGKOK, Nov 26 – The baht is set to continue appreciating and will likely reach 26-27 to the US dollar next year, as the global economy remains fragile due to economic uncertainties in the United States and Europe, according to a leading economic forecaster.

Thanawat Polvichai, director of the University of Thai Chamber of Commerce’s Economic and Business Forecasting Center, said the economic volatilities faced by the US and Europe could cause the world economy to grow only 2% next year instead of 3-4 per cent as earlier expected.

He said the stronger baht would have an adverse impact on Thailand’s exports, which are forecast to grow only 8 per cent against 10-13 per cent as previously projected.

Simultaneously, global oil prices are likely to surge to US$100 per barrel. Given these factors, Thailand’s gross domestic product (GDP) is expected to grow around 4 per cent. Local consumption and tourism are expected to serve as major driving forces in place of exports for economic growth.

Because of this, Thanawat said, the Bank of Thailand needs to intervene in the baht movement, come up with a tax measure to stem speculation, encourage investment overseas, and help small- and medium-size enterprises (SMEs) affected by the baht surge.

Dr Thanawat said SMEs need to adjust themselves to the changing business environment. They must closely assess business risks, take advantage of new technology for production, as well as try to understand and catch up with market trends. (MCOT online news)

-- TNA 2010-11-26

[animatic]

The baht is presently out of control and needs to be reigned in.

[SergeiY]

The central bank will take into account the movement of regional currencies. If the baht strengthens in line with regional currencies, the measures will not be necessary, he said.

that is all need to be said and to be focused on.

The Baht isn't 'out of control' as some foreign dollar tourist might be think, but healthy and stable.

[kuffki]

Invest in European market perhaps, that would really ease the baht.(sorry could not help myself)

Whatever works best, i just hope the brainiacs at BOT will think it through very very well, where to invest and how.

[laocowboy2]

The central bank will take into account the movement of regional currencies. If the baht strengthens in line with regional currencies, the measures will not be necessary, he said.

that is all need to be said and to be focused on.

The Baht isn't 'out of control' as some foreign dollar tourist might be think, but healthy and stable.

Agree. Where a country has strong economic growth and (relative) price stability, its currency will tend to strengthen unless artificially restrained (e.g. China control over renminbi appreciation). Moreover "strength" is always relative. US$ and Sterling are weak 9deliberately) to help those economies increase GDP growth (and inflate away the debt) while the Euro is a shambles at present. If you (say) compare the THB against the Oz dollar, it has not appreciated much at all.

[kutjebu]

The baht is presently out of control and needs to be reigned in.

You mean the US dollar and the Euro are out of control.The same with their economic futures.

The baht strong and the economy is strong.

You can make money on the Thai stock market and your profit is in baht.

[asiawatcher]

Would have to say Baht is strong but not artificially. Euro and US are both weak due to specific performance of their economies and yes, I feel they are both out of control and being manipulated and figures given by Fed and Euro banks are falsified. I bet punters on Forex are shorting all the way to healthy profits by enjoying their lack lustre performance.