Govt eases calls for action on baht

Kittiratt says measures may no longer be needed as currency's rise loses steam

The government sees no need for measures to curb the baht's appreciation as the Thai currency's upward trend is showing signs of losing steam, Finance Minister Kittiratt Na-Ranong said yesterday after a meeting with senior officials, including the central bank governor.

Kittiratt, who is also deputy prime minister, said the meeting participants agreed that the baht's increase was not too rapid when compared to other currencies in the region. He said the Bank of Thailand (BOT) had prepared measures to curb the baht's appreciation, although the meeting saw no need for them at the moment.

Prime Minister Yingluck Shinawatra and BOT Governor Prasarn Trairatvorakul also attended the meeting.

The BOT's Monetary Policy Committee will hold its monthly meeting to report on the country's economic conditions and the situation regarding the baht on Tuesday. Members Dr Ampon Kitiampon, Narongchai Akrasanee, Siri Ganjareondee and Aswin Kongsiri will attend.

Meanwhile, the Finance Ministry will stop issuing inflation-linked bonds as they have been attractive among foreign investors, putting added pressure on the appreciating baht.

However, the ministry has found no traces of currency speculation.

Areepong Bhoocha-oom, Finance permanent secretary, said that of the Bt50-billion bonds issued, about Bt40 billion were inflation-linked bonds, and that foreign investors had bought up 60 per cent of these.

The ministry said it would stop issuing new inflation-linked bonds as they could cause an influx of foreign capital and cause the baht to appreciate further.

Areepong said the issuing of bonds was necessary for the government's budget deficit, though the Finance Ministry might adjust conditions on the purchase of government bonds or block a set number for domestic retail investors.

Over the past three or four months, most of the foreign capital has flowed into the bond market, though no signs of currency speculation has been seen - proving that Thailand is an attractive country for investment.

However, Areepong said "operators have risk-mitigation strategies" for the currency's volatility and that the prime minister had expressed concerns about small-sized operators and planned relief measures for them.

The Finance Ministry and other related agencies have been closely monitoring the baht, which weakened yesterday.

The baht depreciated 1.1 per cent yesterday to 29.43 to the US dollar as of 3.02pm on concerns that policymakers will intervene in the currency market and introduce measures to slow the pace of gains that hurt exports, according to Bloomberg.

To discourage capital inflow, which has been causing baht appreciation, several other measures have been introduced, including the collection of taxes or fees that require the Finance Ministry's approval, an anonymous source from the Bank of Thailand said.

Meanwhile, bankers yesterday called on the government to be careful in taking measures to curb the baht's appreciation.

Krissada Lamsam, vice president of KBank, said a lack of measures would boost the baht's value further, though he expected foreign capital to continue flowing in from countries where there is an economic recession.

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Article source: http://www.thethailandlinks.com/2013/04/27/govt-eases-calls-for-action-on-baht/