To strengthen exports, currency market intervention: KBank

With exports 75% of Thai economy, controlling baht to remain competitive on international export & tourism markets very important for Thailand, so Bank of Thailand intervened.

CURRENCY MARKETS, EXCHANGE RATES & EXPORTS

To strengthen exports, currency market intervention by Bank of Thailand happened: KBank says

14/07/2017
Somruedi Banchongduang

Business people and exporters worry that the current baht strengthening will stop the export recovery momentum stalling in Thailand.

Thailand's central bank, the Bank of Thailand (BoT) does not make an official announcement when it intervenes in currency markets.

There is, however, evidence that the BoT intervened in the currency market last week, according to a senior official at the commercial bank Kasikornbank (KBank).

it is believed that this intervention was aimed at controlling the baht exchange rate and preventing the baht from strengthening in a way that would slow down Thailand's nascent export recovery momentum.

A sign of the central bank's intervention was that the baht was pegged back at no more than 33.80 to the dollar throughout last week.

This is according to Kobsit Silpachai, head of K Bank's capital market research department.

The baht was trading in a range just shy of 34 to 34.16 between July 3 and 7.

WHY CURRENCY MARKET INTERVENTION TO CONTROL EXCHANGE RATE? 

When a currency (exchange rate) strengthens it becomes more valuable or expensive compared to other currencies which means goods and services sold in the currency, such as exports and tourism in Thailand, become more expensive and less attractive to consumers which could lead to declining sales and revenue.

CENTRAL PLACE OF EXPORTS & EXCHANGE RATE IN THAI ECONOMY

Exports represent 75% of the Thailand's GDP over the last four quarters.

The country's high current account surplus is the main reason for the stronger baht exchange rate, he said.

Another factor that will have an impact on currencies around the world is the US Federal Reserve's monetary policy.

EXPORTS & CURRENCY COMPARED TO ASEAN NEIGHBOURS

The baht is among the best- performing currencies in Asia, up 5.3% year-to-date against the US dollar.

Exports grew 4% on average in the past 12 months, compared with Vietnam's 15%, Indonesia's 10%, and the Cambodia, Laos, Myanmar and Vietnam (CLMV) market's 12%.

EXPORTERS HAVE CALLED FOR INTERVENTION

With a firmer baht, exporters called on the Bank of Thailand (BoT) to step in to prevent them from taking a hit on exports, which are picking up.

RECENT JUMP IN EXPORTS 

Thai exports jumped 13.2% year-on-year in May to US$19.9 billion (676 billion baht), the highest in more than four years.

In the first five months of 2017, exports rose 7.2% to $93.3 billion, according to the Commerce Ministry.

With higher-than- expected growth in exports, the Bank of Thailand this month raised its full-year export growth forecast to 5% from 2.2% and slightly raised the country's 2017 GDP growth estimate to 3.5% from 3.4%.

Kasikorn Research Center also revised up its export growth forecast to 3.8% for the year from 2%.

Despite the firmer baht, KBank is maintaining its projection of 34.50 against the dollar at year's end, Mr Kobsit said, adding that the local currency is expected to weaken to 34.20 this quarter.

The baht on Thursday firmed to 33.95 to the dollar from Wednesday's 33.96.

http://www.bangkokpost.com/news/politics/1286659/bot-suppressed-baht-to-bolster-exports-kbank

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