Pressure on monetary policy by Thai export sector
Bangkok Post Article: Thursday July 05, 2007
CURRENCIES
Central bank urged to help rein in baht
POST REPORTERS
The Bank of Thailand is being urged to take necessary measures to prevent the value of the baht from rising rapidly and damaging the country's exports, says Santi Vilassakdanont, the chairman of the Federation of Thai Industries (FTI).
Since the baht has been appreciating rapidly and reached a 10-year high on Tuesday, most exporters expressed grave concern that the country's competitiveness would be eroded if the currency strengthened further.
"If the situation does not get better in a week or two, the federation's executives will call on their counterparts at the central bank to discuss the measures necessary to stabilise the baht," said Mr Santi.
The baht reached a new 10-year high yesterday at 34.17 to the US dollar in local trade on continued foreign inflows into the equity market, according to the Bank of Thailand.
Mr Santi said the appreciation, which began last year, had hurt exporters severely. Some had to offer big discounts on their products in an attempt to keep their customer bases in the second quarter.
Though exports are still growing, exporters are not gaining much from the high figures as many expected.
Atchana Waiquamdee, the deputy central bank governor, said the appreciation of the baht was in line with market forces and was being driven by heavy foreign capital inflows into local stocks.
"There is no need for the central bank to intervene in the market. We are monitoring developments closely, but the currency is moving in line with regional trends," she said.
Dr Atchana said she would not comment on the baht on a daily basis and that calls for intervention by exporters would need to balanced by an "overall perspective".
Foreign capital inflows into the equity market are exempt from the central bank's 30% reserve rule on inflows and also do not need to meet the 100% hedging requirement for short-term flows.
The baht has gained around 4% against the US dollar since the beginning of the year after rising nearly 15% in 2006, thanks in part to heavy portfolio investments by foreign investors, as well as strong export growth, resulting in large trade and current-account surpluses.
The National Economic and Social Development Board last month revised upward its trade surplus forecast for the year to $7.7 billion and the current-account surplus to $8.5 billion. This compares with a trade surplus of $2.2 billion and a current-account surplus of $3.2 billion in 2006.Boonkit Chitngamplang, chairman of the FTI's jewellery and ornaments club, said the local jewellery industry was suffering a triple blow _ the strengthening baht, the revocation of low tariffs under the Generalised System of Preferences (GSP) for the products by the United States, and the rising costs of raw materials.
