Central Bank Admits Currency Intervention

[george]

Central bank admits currency intervention

BANGKOK: -- The baht continued to strengthen overnight, despite desperate attempts by the Bank of Thailand to control the currency's rate against the US dollar.

Early this morning (Thailand time) the baht had gained value again in overnight trading in New York, and was trading at 37.5 baht per dollar.

Bank of Thailand Governor M.R. Pridiyathorn Devakula admitted the central bank had intervened "heavily" in the baht movement over the past four to five months, but refused to say how much it has spent in the so-far useless attempt to control the currency.

M.R. Pridiyathorn cite an inflow into the country of up to $11.5 billion, the equivalent of around 448.5 billion baht, in what he called the highest influx in history.

He said the bank made the heavy intervention because the baht and other currencies in Asia had strengthened since late October last year.

He noted the baht had appreciated by around 8.2% since early this year because the United States government had adopted the weak dollar policy to help solve its huge trade deficit. It resulted in foreign capital flowing into Asia and Thailand.

He said most of the capital had flown into the Stock Exchange of Thailand since the price/earning ratio of the Thai stock market remained lower than those of neighbouring countries.

Other capital entered in the form of foreign direct investment worth $3.3 billion and some focussed investment on bonds and other debt instruments.

He said the huge inflow of the huge capital was swifter and heavier than at any time in Thai history. The central bank was not in a position to prevent the baht from strengthening, but had attempted to intervene to ensure the baht had gradually appreciated so that it could not affect the country’s exports.

Now, he claimed the central bank is in a position to cope with the strengthening of the baht quite efficiently. This was despite the fact the movement of the baht was exactly parallel with other currencies in the region.

However, he said, the BOT wanted exporters to try to adjust themselves to the continued appreciation of the baht since there is still an inflow of capital into Asian countries and Thailand.

-- TNA 2006-04-28

[Jai Dee]

Bank of Thailand gives reasons for rising value of Thai currency

The governor of the Bank of Thailand stated that the continuous growth of the Thai economy, coupled with increasing foreign investment in the nation, will definitely affect the strength of the Thai baht.

MR Pridiyathorn Devakula (ปรีดิยาธร เทวกุล), the governor of the Bank of Thailand, commented on the increased strength of the Thai baht, stating that the increasing strength of other currencies in the region was a mitigating force in encouraging foreign investment in Thailand, and in the shift of favored trade currency from the US dollar to the region's local bills. MR Pridiyathorn added that another factor in favor of the increasing value of the Thai baht was in the continuous economic growth of the nation.

The governor stated that the main investment channels being focused on was in the Stock Exchange of Thailand, in direct investment, and in government bonds.

Source: Thai National News Bureau Public Relations Department - 28 April 2006

[cclub75]

Central bank admits currency intervention

BANGKOK: -- The baht continued to strengthen overnight, despite desperate attempts by the Bank of Thailand to control the currency's rate against the US dollar.

Early this morning (Thailand time) the baht had gained value again in overnight trading in New York, and was trading at 37.5 baht per dollar.

Bank of Thailand Governor M.R. Pridiyathorn Devakula admitted the central bank had intervened "heavily" in the baht movement over the past four to five months, but refused to say how much it has spent in the so-far useless attempt to control the currency.

"heavily" ?

I think I'm dreaming : it's exactly the same scheme than 1997 !

-no we don't intervene

-yes we do

-no i can not tell you how much i spend

-i'm broke, ciao, sawadee khrap

They never learn.

So what can do the tiny BOT with its 50 billions USD reserves ? Against an ocean of cash around the world, that can move in a few nano seconds ?

Compare to 97, the situation is different : the world is overflooded with cash. And people start to be afraid of USD. So, they come to Thailand. Stock market. And eventually they will leave, in a snap, when they'll realize that Thailand has no economic policy.

What the government do today :

-say no to public buses fares hikes

-cheating inflation figures

-reduce the price of diesel, by cutting the payback on Oil Fund, when world price goes up

-continue to promote heavily exportation of goods that are doomed regarding the oil problem : agriculture and fishery....

-and "intervene" (what a joke !) on the currency market to prevent the THB to go up

Voila this is the economic policy of Thailand in 2006.

[stumonster]

with the governments protestations last week about not being broke.

Egat admitting it cannot build new power plants because of lack of funds.

Rising oil prices affecting production across the country.

exports declining because of the Thai baht and production issues.

Uncertianty on the political scene.

is there a cliff not far away for Thailand?

[Plus]

Exports are not declining, they are rising, maybe at a bit slower rate.

As long as competitors currency is strengthening, too, situation isn't all bad. They have to be careful, though, exports is a cornerstone of Thai economy, not the OTOP, Village Funds and dual-track bullshit.

Reducing diesel price is a good thing, IMO. They collect so much tax from it and then complain how it affects inflation.

[Samuian]

well, well, well.. the "dark overlord of the empire" just on a overseas trip - just made a neat bundle - tax free - maybe he's playing his Ace now. There is a lot to gain - the Baht is "strong" right now - Capital outflow was big in 1997 just before the crash - it was "huge" before 1997 - the Companies of the now "inactive" PM had their hands full with big transfers to HK and SIN... in those days - what was he then? And Who was the PM back then - wasn't it his Vice PM of today? Is that why everybody kept saying that the TRT is only old Wine in new Bottles?

Ahhh wel... Baht if it strengthens any further buy's "cheap" hard currency - buy it and sit on it... in 1997 one could have easely doubled any amount - in just 6-7 month time.

In June 1997 24-5 ThB to the US$ in January '98 51 ThB to the US$!

And then where is the Baht "strong" at around 38 it has never really recovered.

[backflip]

"the world is overflooded with cash. And people start to be afraid of USD. So, they come to Thailand. Stock market. "

Brilliant analysis. Absolutely. The only alternative to the USD is the THB. No. I don't. Think so.

[cclub75]

"the world is overflooded with cash. And people start to be afraid of USD. So, they come to Thailand. Stock market. "

Brilliant analysis. Absolutely. The only alternative to the USD is the THB. No. I don't. Think so.

I never said that it was the only "alternative". I only forgot the word "some of them"...

It's just a fact that big amounts are pulling off right now from USD assets, to go to :

-asian stock markets

-commodities (gold, etc.)

-other currencies

But still, i don't believe that the THB appreciation will last. On the contrary.

[xbusman]

Exports are not declining, they are rising, maybe at a bit slower rate.

As long as competitors currency is strengthening, too, situation isn't all bad. They have to be careful, though, exports is a cornerstone of Thai economy, not the OTOP, Village Funds and dual-track bullshit.

Reducing diesel price is a good thing, IMO. They collect so much tax from it and then complain how it affects inflation.

Export are not declining because the rise has been very rapid and contracts have a longer delivery period. Exporters will also be protected three to six months through hedging so the effect of the baht has yet to even hit the export sector. Just wait till it does in a rush, starting about next month. Already the commodities exporters who work on spot contracts are screaming but companies like NIKE are already squeezing the manufacturers.

The competitions currency is not strengthening at all. The competition is China, India and Vietnam. You would not believe the huge amount of Thai companies shopping for outsourcing to China this year at the Canton Fair. When the Thai retailors are shopping China what does that bode for Thai exports? Why were they shopping? The Thai baht is so strong making Chinese goods painfully cheap.

Huge forces are on the move in the Thai economy between oil, the baht, capital inflows, the cash out of Shin corp., and the real estate market. I have noticed that when small squeaks of "there may be a problem" appear in the press it usually means that a tsunami has been spotted about five minutes off shore. They dont like to sound alarms so when they do it means get to high ground. Trying vainly to again ameliorate the currencty fluctuations sounds like just such a squeak.

[britmaveric]

Looks like a crash is coming.... not good for Thailand surely.