The Bank of Thailand joined hands with the Hong Kong Monetary Authority yesterday to establish a cross-border payment link to support real-time transactions between the baht and US dollar.
The Payment versus Payment (PvP) link will connect Thailand's BahtNet high-value transfer network with Hong Kong's US dollar RTGS (real-time gross settlement) system. The system is expected to be launched in July 2014.
"The new development will eliminate the risk of foreign exchange transactions whereby a market player delivered the currency it sold but does not receive the currency it bought," said the Bank of Thailand in a statement.
"The new linkage between the two payment systems will strengthen the role of Hong Kong as a payment hub in the region and will offer business opportunities to Hong Kong banks in recruiting Thai banks for providing payment and cash management services."
Krirk Vanikkul, a central bank deputy governor, said the PvP link will help reduce risks in foreign exchange and support the development of banking services and financial products.
He said the central bank only focused on the US dollar to date, as the greenback accounted for 85% of its foreign exchange transactions last year.
HKMA deputy chief executive Peter Pang said the link "eliminates the settlement risk for foreign exchange of varying currencies in different time zones."