Ministers & Policy Makers Meet over Thai Baht Appreciation

Published : September 02, 2010 :: 12:09:35 [ 2,082 views ]

A current two-year high in the Thai baht, which yesterday traded at 31.1 to the U.S. greenback, has forced financial policy makers into a meeting regarding fiscal measures and reports speculating various negative impacts for Thai exporters Wednesday.

Thailand, the 1^st of September 2010: Thai Prime Minister Abhisit Vejjajiva, Finance Minister Korn Chatikavanij, Central bank Governor Tarisa Watanagase and several other ministers met on Wednesday to discuss the appreciation of the Thai baht and its effects on Thai export competitiveness and resultant economic growth targets.

Trading at a peak of 31.1 to the U.S. dollar yesterday, the Thai baht has gained more than 6% against the greenback in the year-to-date, one of the strongest performers in Asia behind the Japanese yen and Malaysian ringgit. In contrast, Vietnam’s dong has fallen over 5.5% against the U.S. dollar on the back of several currency devaluations aimed at boosting exports.

The increasing appreciation of the Thai baht, has forced business leaders and policy makers to question the bahts effect on continued competitiveness in the export market, to which Vietnam, Indonesia and Malaysia are all experiencing significant growth.

Addressing the issue, Ms Watanagase explained that evidence suggested that Thai exports are continuing to grow despite an appreciation of the baht against the dollar. She urged businesses influenced by currency exchange rates to hedge their interests while stating no intervention is necessary from the Central Bank providing the baht continues to move in line with other Asian markets.

“Right now, we rank second in terms of currency appreciation in the region,” she said yesterday. Even so, exports have risen by as much as 30%, even though the stronger baht means lower revenues in baht terms.”

Despite assurances, exports have already begun to slow in recent weeks, with July exports down over US$2 billion from Junes US$17.9 billion. Increasing competition from Vietnam, particularly in the agricultural sector may significantly affect Thailand’s competitiveness in the crucial market.

Surging 37% in a year-on-year comparison, exports have been the major driving factor behind Thailand’s growth for the first six months of 2010, sitting at 10.6% and speculated to reach 20% for the year. Thai Commerce Minister Porntiva Nakasai revealed growth expectations will be in jeopardy if the baht continues to appreciate, urging the Central Bank to adopt measures to stabilise the currency.

The private sector is becoming increasingly concerned by the bahts appreciation, with the Thai National Shippers’ Council (TNSC) voicing their concerns over Thailand’s ability to compete with various other countries in key, agriculture and manufacturing markets.

“Thai exporters are currently unable to compete with competitors in the region, including those from Indonesia and Malaysia … and not to mention the Vietnamese, who have benefited from several rounds of devaluations,” explained TNSC chairman Paiboon Polsuwanna.

At present, no planned intervention has been announced by the Central Bank, while the baht continues to strengthen in the face of stagnant U.S. and European markets. Some analysts predict an exchange of 30 baht to the greenback is imminent, while other Asian currencies see similar appreciation against the dollar, albeit not as significant.

Comments

Greg

said :

Analysing this data and a little I have on the tiger times, I detect very similar trends to a certain 1996-97 era of Asian economic history. We are talking about diferent industries and of course an obviously stronger economy, but as they say, the bigger they are the harder they fall.

SSSSSsspppecultation!!!!!!!

Have we learneded from our past indiscretions?

Email : gregstolls@ftpanalysis.com Date : 2010-09-02 16:52:19

Bob

said :

America has been mortgaging itself since the Reagan deficits of 30 years ago,and it's been obvious since then it was not sustainable. The game is nearly finished, and a decent standard of living for Americans (including me) will be a thing of the past. Unfortunately for the World, even after America implodes financially, it will still be a very dangerous nuisance to the World militarily solely for the benefit of a few elite.

Email : Bob@toobad.com Date : 2010-09-02 14:37:48

aussiebkk

said :

Leave it alone!! Why do Governments always want to meddle with everything.Let the baht find its own place in the market place. A high baht reduces foreign debt and makes imports cheaper many of which are re-exported as value added goods from LOS. Sex tourism may be more expensive .Yeah!Who cares. The last thing Thailand wants to do is create an artifical economy based on the failed USA system. Bail outs,stimulus package bailouts and trade in a clunker programs devised by the best and brightest.Forget that American/socialist interventionist junk ; just leave the baht alone.

Email : unibkk@hotmail.com Date : 2010-09-02 13:02:13

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