Central bank chief refutes US claims of baht manipulation

Central bank chief refutes US claims of baht manipulation

Bank of Thailand governor Veerathai Santiprabhob. (Bangkok Post file photo)
Bank of Thailand governor Veerathai Santiprabhob. (Bangkok Post file photo)

CEBU, Philippines -- There is no evidence to support the US assertion that authorities are manipulating the baht's value to give exports an unfair advantage, according to Bank of Thailand governor Veerathai Santiprabhob.

While the central bank intervenes in the foreign-exchange market at times, the baht has strengthened against the US dollar this year compared to other regional peers, Mr Veerathai said in an interview with Bloomberg Television’s Haslinda Amin in Cebu, the Philippines.

This was proof it was not trying to keep the currency weak.

He was responding to questions about the Trump administration's decision to investigate Thailand for possible unfair trade practices.

“I don’t think anyone has evidence that Thailand has manipulated the currency to gain an unfair competitive advantage,” the 47-year-old bank governor said on Thursday on the sidelines of a conference of regional finance ministers and central bank chiefs.

“Thailand has not adopted any exchange-rate policies to gain an unfair competitive advantage in trade.”

President Donald Trump’s executive order to investigate 16 countries that run the largest bilateral trade deficits with the US poses a risk for export-dependent Thailand and complicates the central bank’s currency policy. The bank has boosted foreign-exchange reserves since the end of last year in the face of surging inflows, helping to cap the baht’s gains.

“At times, we might have to intervene in the foreign-exchange market but that’s largely because of the intense capital inflows that we are on the receiving end of,” Mr Veerathai said. The inflows, fueled by excess global liquidity and Thailand’s sound macro-economic policy environment, “have been coming in in a short period of time that could create adverse consequences", he said.

About US$7.4 billion has poured into Thai bonds in the past year, a period during which the baht was one of the best performers among major Asian currencies tracked by Bloomberg, strengthening 2% against the dollar.

The Bank of Thailand has cut the supply of some debt this month and Mr Veerathai said it can consider further steps.

Trade Surplus

“Foreign-exchange intervention is definitely a measure that all central banks need to have on the menu list but there are also other policy measures that one can look at, from market-based measures to the likes of capital-flow management measures,” he said.

Thailand had the 11th largest trade surplus with the US of about $19 billion last year. Finance Minister Apisak Tantivorawong on Monday said he hoped for talks about trade ties before any unilateral American steps to deter imports. The military-run government this week also denied that it manipulates the baht to bolster overseas sales.

The stronger currency has curbed inflation and capped economic growth. Consumer prices rose at the slowest pace in four months in March, gaining 0.76% from a year ago and dipping below the target range of 1% to 4%. While the central bank predicts growth will accelerate to 3.4% in 2017, which would be the highest in five years, that’s still below Veerathai’s estimate of potential growth of 4% to 4.5%.

The Bank of Thailand on March 29 left the benchmark interest rate unchanged for the 15th straight meeting near a record low of 1.5%, a rebuff to calls from the International Monetary Fund to cut borrowing costs to spur the economy.

Veerathai said the central bank is mindful of its limited policy space given the benchmark rate is already “very low” and there are global economic uncertainties.

“The MPC decided to keep the rate on hold and that’s the best option for Thailand when you look at the horizon,” he said. “When we have limited policy space available, we have to use the limited policy space available wisely.”


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