How to control a rising baht? | Bangkok Post: learning

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How to control a rising baht?

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With the US, Japan & Europe all pumping money into their economies, the baht is rising & exports getting more expensive & less competitive, but what can be done? 

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CURRENCIES

Measures on the table to rein in the baht

Bond auction bidding cited as a pressure point
11 Apr 2013
Parista Yuthamanop & Nuntawan Polkuamdee

The baht continued to gain robustly yesterday amid policymakers' announcements to implement measures if necessary.

Markets expected currencies of most emerging economies to be under significant pressure of appreciation as the Federal Reserve, the Bank of Japan and the European Central Bank were likely to keep pumping in new liquidity to prop up their economies in the foreseeable future.

Kobsidthi Silapachai, Kasikorn Bank's head of capital market research, said investment funds' action of seeking gains from currency changes and interest rate differentials in short-term bonds in the domestic market every Tuesday has been a big factor pushing the baht up in the recent period, so the central bank might address the capital inflows by reducing the attractiveness of this channel.

The Bank of Thailand is the major issuer of such short-term bonds which it uses to absorb liquidity injected from market intervention transactions.

The Monetary Policy Committee's stance from the April 3 meeting showed that the majority of its members were not inclined to reduce the policy interest rate from 2.75% as a means to slow the baht's rise.

There is a strong correlation between foreign investors bidding in the central bank's bond auction and the baht's appreciation, Mr Kobsidthi said.

"Hedge funds have few risks subscribing to such short-term bonds. They will receive profits from the central bank in a short period when the bonds are due, without having to sell in the secondary market. The central bank should lengthen the maturity of the bonds, or create other means to control the money base," said Mr Kobsidthi

Dividend payments of locally listed firms and persistent uncertainty due to the euro zone's banking crisis could delay the baht's appreciation in the near future. Mr Kobsidthi expects the baht to stand at 28.5 to a dollar by the year-end.

He said he anticipated the US central bank would continue money pumping into the foreseeable future, given bleak non-farm employment and the increasing upward pressure on the baht, aside from the Bank of Japan's aggressive yen weakening move.

Chantavarn Sucharitakul, the BoT's assistant governor, said the baht's strengthening was part of investors catching up from 2012 during which the baht appreciated by 3% against the dollar - less than other regional currencies such as 6-7% recorded by the Korean won.

But there had been strong demand for foreign currency in the economy which helped to ease the appreciation of the baht.

"The baht's volatility is around 5% year-to-date, more than previously, and stood in the middle range of that of regional currencies. That the baht has moved in a two-way direction is a reason for the increase in the baht's volatility," she said.

Ms Chantavarn noted that the baht strengthened by 2.5 against the dollar over the past month, the fourth-best currency showing after the Icelandic krona, the Mexican peso and the Malaysian ringgit, all of which gained against the greenback during the same period.

She said countries in the region have different economic situations, resulting in the diverging directions of their currency movements in the year to date.

Maybank Kim Eng Securities CEO Montree Sornpaisarn said the depreciation of other major currencies is the main reason for the rapid rise of emerging countries' currencies including Thailand, but it is not a serious concern.

"Looking at Thailand's fundamentals, our economy remains strong, our current account is still in surplus with major industries such as tourism, automobiles and food expanding healthily," said Mr Montree. "These factors have attracted foreign capital chasing higher yields, so the rise of the baht is reasonable."

(Source: Bangkok Post, CURRENCIES, Measures on the table to rein baht, Bond auction bidding cited as pressure point, 11 Apr 2013, Parista Yuthamanop & Nuntawan Polkuamdee, link


Baht Appreciation Vocabulary
 
currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)

appreciation - currency appreciation; when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive) ค่าเพิ่ม, การมีค่าเพิ่มขึ้น
baht appreciation - when the value of the baht is increasing compared to the dollar and other currencies (and exchange rate with dollar going down), making Thailand exports more expensive and less competitive compared to other countries

region (noun) - an area of a country or of the world (such as Asean region or Southeast Asia) ภูมิภาค
regional (adjective)
regional currencies
appreciation of regional currencies

depreciation - currency depreciation, when the value of the baht is decreasing so Thai exports become cheaper and more competitive  การลดค่า
the depreciation of major currencies

measures - actions taken to solve a problem มาตรการ
table - to suggest formally in a meeting เสนอเรื่องเข้าที่ประชุม
on the table - a suggestion has been presented formally in a meeting
rein in the baht - stop the baht from increasing in value (which makes Thai exports more expensive)

bond -
an agreement by a government or an organization to pay back the money an investor has lent plus a fixed amount of interest on a particular date; a document containing this agreement (See Wikipedia)
short-term bonds
issuer of short-term bonds
auction - selling things by competitive bids, selling to the person who offers that best price การขายโดยการประมูล, การขายทอดตลาด (See Wikipedia)
bond auction

bidding - making an offer in an auction (here trying to offer to do project for lowest cost and thus win contract)
cited as - mentioned (to support a point you are making or arguing) กล่าวถึง
pressure - a force causing change, stress ความกดดัน 
point  - one small place จุด
policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
policymaker - a high-level government official who makes policy
announcement - something that an organization tells people การประกาศ

implement - put a plan into action, make a plan work and be used นำมาใช้ นำ แผนหรือนโยบายมาปฏิบัติ

gain robustly - increase strongly 
amid ...  - happening at the same as ...

expected - believe will happen คาดว่า (จะเกิดขึ้น)
emerging economies - fast growing economies like Thailand or Malaysia (not yet fully developed)
significant - important สำคัญ
significant pressure of appreciation

central bank - the main bank in a country that controls the supply of credit (loans) and money  and provides financial services to the government and other banks  

Federal Reserve - the central bank of Europe
Bank of Japan - the central bank of Japan
European Central Bank - the central bank of Europe

prop up -
to help something continue to exist or continue to be strong; to support something
prop up the economy

liquidity
- the availability of cash in the economy (through loans) to businesses and consumers สภาพคล่อง
pump in liquidity - increase liquidity (increase loans and money available in an economy, could increase growth and incomes and/or inflation)
pumping in new liquidity to prop up their economies
in the foreseeable future - a short time in the future so events and changes can be predicted; the predictable future

capital
- money invested in a business ทุน, เงินทุน
capital market  - the stock exchanges and markets for money and loans where companies and governments sell shares, bonds, etc. in order to obtain the money they need (See Wikipedia)
capital market research
capital inflows - investment money coming into the country (mostly short-term "portfolio" investment, not Foreign Direct Investment (FDI))
foreign capital
foreign capital chasing higher yields

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
investment fund - a large amount of money from many people used to invest in stocks, securities or directly in businesses
interest - payments made for the use of another's money for a period of time
interest rate differentials - differences between interest rates (which can be used by investors to make a profit)
domestic - within the country ภายในประเทศ
domestic market
factor - a fact or situation which influences the result of something ปัจจัย
a big factor pushing the baht up
address - to try to deal with and solve a problem จัดการปัญหา
address the capital inflows
attractiveness - when something looks good , so you want to get it or do it
channel - to direct something into a particular place or situation ใช้ไปในทาง
reducing the attractiveness of this channel

absorb - to take something in from the outside (such as a liquid or gas or money in the economy) ซึมซับ ดูดกลืน
absorb liquidity

intervention - when the central bank buys and sells in foreign currency markets to influence the baht exchange rate; becoming involved in a situation and trying to change it การแทรกแซง
market intervention transactions - when the central bank buys or sells the currency to control the currency's value

inject - put something into (here: put more money, liquidity, loans, credit, into the economy)
injected from market intervention transactions

stance - your attitude, views or opinion about an issue ความเห็น จุดยืน
the Monetary Policy Committee's stance
meeting - when a group of people come together to discuss issues and make decisions การประชุม
majority - more than 50% ส่วนมาก ส่วนใหญ่ เสียงส่วนมาก
the majority of members
not inclined to reduce the policy interest rate
means - method; way วิธี, วิธีการ
as a means to slow the baht's rise

correlation - when two things tend to happen at the same time, a statistical association สหสัมพันธ์ (สถิติ)
there is a strong correlation between foreign investors bidding and appreciation

funds - an amount of money kept for a special purpose เงินทุน
hedge funds - an investment fund used by people or organizations with large amounts of money to invest and not open to the general public, that tries to gain maximum profit by using a variety of investment strategies, including some with very high risk เงินลงทุนเพื่อการเก็งกำไร
subscribing to short-term bonds - buy and hold the bonds for a period of time
bonds due - when the the period of the loan in a bond is finished and the borrowing organization pays back the money borrowed
when the bonds are due
maturity - the length of the life of an asset
maturity of the bonds
secondary market - the market where you sell something again after buying it, for the "second" time ตลาดรอง

money base - monetary base,  "highly liquid money that consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks' reserves with the central bank... Open market operations, the main traditional monetary policy tool directly affects the monetary base; the monetary base can be expanded or contracted using an expansionary monetary policy or a contractionary monetary policy (See Wikipedia)
other means to control the money base

dividend - profits that a company pays to its shareholders and owners (not put back into the business)  เงินปันผล, ส่วนแบ่งจากผลกำไร, ผลกำไร
dividend payments
listed - when a company's stock is traded on the stock exchange
locally listed firms - companies that are listed on the Stock Exchange of Thailand (SET)
persistent - continuing, not stopping อย่างต่อเนื่อง
uncertainty - not knowing what will happen next
crisis - an urgent, difficult or dangerous situation วิกฤต  วิกฤตการณ์
euro zone banking crisis
delay - to make something happen at a later time than originally planned or expected เลื่อน
delay the baht's appreciation

aggressive - forceful, determined, and eager to win or succeed ซึ่งมีความมั่นใจสูง   ก้าวร้าว
the Bank of Japan's aggressive yen weakening move.
anticipate - believe something will happen before it happens, expect something to happen คาดว่าจะเกิดขึ้น
he anticipated .... in the foreseeable future

bleak
- having little or no hope for the future; future does not look bright; unlikely to improve โดยสิ้นหวัง, โดยหมดหวัง, เปล่าเปลี่ยว  สิ้นหวัง
employment - people having jobs (not being "unemployed" without a job and income)
a bleak employment picture - a situation with few jobs and little hope for the future

demand - the need and desire to buy goods and services by households and businesses  ความต้องการ
strong demand for foreign currency
ease - to make or become less severe, difficult, unpleasant, painful, etc บรรเทา ทำให้ง่าย
ease appreciation of the baht

volatility - a measure of risk in financial markets, the degree to which asset prices swing up and down changing suddenly and unexpectedly (bad because it makes it difficult to make decisions) ความไม่แน่นอน อัตราความเสี่ยงต่อการลงทุนทางการเงิน
the baht's volatility is around 5% year-to-date
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
a reason for the increase in the baht's volatility

the greenback - the US dollar
diverging directions - going in different directions
the year to date - this year, up to now

rapid - happening fast quickly อย่างรวดเร็ว
the rapid rise of emerging countries' currencies

concern - a worry ความกังวล
not a serious concern

fundamentals - the underlying health of a company or economy (that will determine whether it is profitable and survives in the long-run) ที่สำคัญ ที่เป็นตัวกำหนดความมั่นคงของบริษัท
Thailand's strong fundamentals

current account - a record of the money coming into and going out of a country as a result of imports and exports of goods and services, income from investments  
surplus - an amount above the required or necessary amount
current account in surplus - meaning roughly: value of exports more than imports

factors - one of the things that effects a situation or event ปัจจัย
These factors have attracted foreign capital chasing higher yields, so the rise of the baht is reasonable.

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