Thai Central Bank Tightens Rules On Baht Transactions

[Jai Dee]

Thai central bank tightens rules on baht transactions - report

BANGKOK (XFN-ASIA) - The Bank of Thailand slapped controls on foreigners' purchases of certain debt securities and derivatives contracts in a bid to limit speculative pressure on the country's currency, a report carried by Wall Street Journal Asia said.

Concerned that the baht's recent rise could choke economic recovery, the Bank of Thailand banned the sale of bills of exchange to non-residents, the report said.

The central bank also said it will limit non-residents' short-term baht exchange-rate derivative transactions with onshore institutions to 50 mln baht, or about 1.25 mln usd, it added.

The limit also applies to groups of offshore firms, such as offshore branches of a single financial institution, it said.

'The [derivatives] transactions ... are comparable to providing Thai baht liquidity to non-residents or borrowings in Thai baht from non-residents without underlying trade and investment in Thailand,' the central bank was quoted as saying.

The report said the moves pushed the dollar higher to 36.73 baht, where it ended trading, from 36.63 baht just before the announcement. The dollar has lost about 13 pct of its value against the baht since early June.

HSBC strategist Richard Yetsenga was quoted by the report as saying that the measures on their own do not change the positive outlook for the currency but they make positioning for baht appreciation more difficult.

Under the new rules, financial institutions can conduct interest-rate derivatives deals with non-residents only if the transactions do not cover the full principal amount of the underlying asset. Payments to nonresidents must be in foreign-currency equivalents, not baht, according to the report.

Financial institutions can also transact equity and credit derivatives with non-residents to manage risk. Financial institutions can still purchase baht-denominated bonds issued in Thailand.

However, non-resident issuers must swap the proceeds into foreign currencies with domestic financial institutions unless the proceeds are used for activities in Thailand or neighboring countries, the report added.

Source: AFX News - 8 November 2006

[Jai Dee]

New curbs on trade with non-residents

The Bank of Thailand has prohibited banks from trading short-term debt instruments with non-residents to guard against speculation on the baht.

Suchart Sakkankosone, director of the central bank's exchange control and credit department, said authorities had allowed banks to issue bills of exchange since August, with the stipulation that trade could be made only with local counterparties.

More from the Bangkok Post here.

[Jai Dee]

Thai central bank says ready to act on rising baht

BANGKOK, Nov 8 (Reuters) - The Bank of Thailand is prepared to take more steps to discourage excessive baht speculation and prevent excessive volatility in the currency, BOT Governor Tarisa Watanagase said on Wednesday.

Tarisa's statement following a central bank announcement on Tuesday that it was moving to curb baht supply which foreign speculators could use in the market to trade on Asia's most bullish currency this year.

Source: Reuters - 8 November 2006

[Jai Dee]

Baht currency strengthened early today

A BankThai executive said the baht currency opened in the market this morning at 36.64-36.66 baht per US dollar. The baht value has continued to strengthen since yesterday. The value yesterday was 36.65-36.70 baht per US dollar. The Bank of Thailand (BOT) yesterday declared the regulations to counter the speculation of Thai baht. The baht currency is strengthening in line with the yen currency, and there have been foreign capital constantly flowing into Thai exchange which caused appreciation in the baht currency.

The expected baht currency today is at 36.55-36.70 baht per US dollar. The market is waiting for international trade figures for last month, the numbers of weekly welfare requirement which declared on Thursday and the results of US midterm elections because there will be changes in the policy if there are changes in the administrative party.

Source: Thai National News Bureau Public Relations Department - 08 November 2006