Prepare for volatility, says Bank of Thailand governor

YUKAKO ONO and HIROSHI KOTANI, Nikkei staff writers

 

Bank of Thailand Governor Veerathai Santiprabhob says that businesses and governments should prepare for “the current world of volatility.”

 

Baht-rupiah settlement on horizon to deal with shaky dollar

 

BANGKOK -- Businesses and emerging countries in Asia must brace for a time of volatility by stepping up foreign exchange hedging and lowering their dependence on foreign currencies and financing, Bank of Thailand Governor Veerathai Santiprabhob said in an interview with the Nikkei Asian Review on Friday.

 

Thailand recently began talks with Indonesia to promote settlement for trade and investment between the two countries in their local currencies instead of in the U.S. dollar. "This is an example of benefits of promoting one form of regional financial connectivity at a time when the global financial environment is very volatile," Veerathai said.

 

Much of the cross-border transactions within Asia are quoted in U.S. dollars. In 2015, 84% of trade between Thailand and Indonesia was via the dollar. But the "dollar has become very volatile and is fluctuating," said the governor. Local-currency settlement will lower that volatility as well as lower spreads for currency conversions.

 

Full story: http://asia.nikkei.com/Politics-Economy/Economy/Prepare-for-volatility-says-Bank-of-Thailand-governor

 

Asia.Nikkei 2017-02-12

If direct settlement is an issue, why not use the Singapore Dollar ?  It is local and rock solid.  

2 hours ago, rooster59 said:

"This is an example of benefits of promoting one form of regional financial connectivity at a time when the global financial environment is very volatile," Veerathai said.

Just like when the junta promoted the use of the ruble and yuan for Russian and Chinese trade. How's that working out for Thailand?

And only last week they were bleating about their wonderful USD foreign reserves. 

 

Worriyng that there is a lack of basic cadence between the frontline agencies & departments!

3 hours ago, rooster59 said:

promote settlement for trade and investment between the two countries in their local currencies instead of in the U.S. dollar.

More and more countries are going this route. One has to wonder when a country owes 20 TRILLION in debt whether it will ever be paid back. The greenback has always been taken at face value but it seems the value has been trimmed by 96% over the last 100 years or so. There is no way of inflating your way out of a debt of this magnitude. 

11 minutes ago, elgordo38 said:

the value has been trimmed by 96% over the last 100 years or so.

Any economy that has had net inflation over the last 100 years will likely have the same experience.

On the other hand inflation commensurate with GDP growth is a good thing so long as income equality is maintained. Which in the USA has been substantially lost with an ever decreasing number of people holding an ever increasing portion of the national wealth. Such trend for income inequality is likely to continue for the next four years.

1 hour ago, elgordo38 said:

More and more countries are going this route. One has to wonder when a country owes 20 TRILLION in debt whether it will ever be paid back. The greenback has always been taken at face value but it seems the value has been trimmed by 96% over the last 100 years or so. There is no way of inflating your way out of a debt of this magnitude. 

The dollar has been around for 100 years or so, many currencies not so much.

The whole thing sounds inflated to me TIT

5 hours ago, yellowboat said:

If direct settlement is an issue, why not use the Singapore Dollar ?  It is local and rock solid.  

"From 1985 onwards, Singapore adopted a more market-oriented exchange regime, classified as a Monitoring Band, in which the Singapore dollar is allowed to float (within an undisclosed bandwidth of a central parity) but closely monitored by the Monetary Authority of Singapore (MAS) against a concealed basket of currencies of Singapore's major trading partners and competitors. This, in theory, allows the Singaporean government to have more control over imported inflation and to ensure that Singapore's exports remain competitive".

 

https://en.wikipedia.org/wiki/Singapore_dollar

 

Singapore's major trading partners are:

 

• China: US$47.7 billion (13.8% of total Singapore exports)
• Hong Kong: $39.7 billion (11.4%)
• Malaysia: $37.8 billion (10.9%)
• Indonesia: $28.4 billion (8.2%)
• United States: $23.2 billion (6.7%)
• Japan: $15.2 billion (4.4%)
• South Korea: $14.5 billion (4.2%)
• Taiwan: $14.5 billion (4.2%)

It therefore follows that Singapore's concealed basket or currencies including the currencies of the above countries, hardly a stable bunch.

4 hours ago, Srikcir said:

Any economy that has had net inflation over the last 100 years will likely have the same experience.

On the other hand inflation commensurate with GDP growth is a good thing so long as income equality is maintained. Which in the USA has been substantially lost with an ever decreasing number of people holding an ever increasing portion of the national wealth. Such trend for income inequality is likely to continue for the next four years.

Yep you hit the nail on the head wage disparity. We are not all that far away from the time when the uber rich will want us to issued with a dog tag to keep track of us. Glad I will be pushing up daisies by then. 

2 hours ago, chiang mai said:

"From 1985 onwards, Singapore adopted a more market-oriented exchange regime, classified as a Monitoring Band, in which the Singapore dollar is allowed to float (within an undisclosed bandwidth of a central parity) but closely monitored by the Monetary Authority of Singapore (MAS) against a concealed basket of currencies of Singapore's major trading partners and competitors. This, in theory, allows the Singaporean government to have more control over imported inflation and to ensure that Singapore's exports remain competitive".

 

https://en.wikipedia.org/wiki/Singapore_dollar

 

Singapore's major trading partners are:

 

• China: US$47.7 billion (13.8% of total Singapore exports)
• Hong Kong: $39.7 billion (11.4%)
• Malaysia: $37.8 billion (10.9%)
• Indonesia: $28.4 billion (8.2%)
• United States: $23.2 billion (6.7%)
• Japan: $15.2 billion (4.4%)
• South Korea: $14.5 billion (4.2%)
• Taiwan: $14.5 billion (4.2%)

It therefore follows that Singapore's concealed basket or currencies including the currencies of the above countries, hardly a stable bunch.

No, they are not stable, but it is a good spread of risk amongst the unstable. 

5 hours ago, yellowboat said:

No, they are not stable, but it is a good spread of risk amongst the unstable. 

Glad to see Thailand was not in the mix. I can now sleep better at night.

This non use of US currency for inter country transactions is becoming much more prevalent

& can save up to 4% for both parties

5 minutes ago, natway09 said:

This non use of US currency for inter country transactions is becoming much more prevalent

& can save up to 4% for both parties

Wonder where the 4% goes?? A party for both parties??

4 minutes ago, natway09 said:

This non use of US currency

Where do you read "non use of US currency" in the article? Singapore's currency mix is unknown but implied by chiang mai in post #11 to include US currency.