The Bank of Thailand is calling on businesses to invest constantly in currency risk management while reassuring them of its policy to keep the baht at appropriate levels.
The Federation of Thai Industries (FTI) on Tuesday submitted to the central bank their suggestions on how to deal with the baht appreciation, which began this year.
Pongpen Ruengvirayudh, the central bank's deputy governor for monetary stability, said after the meeting that the central bank had more than one benchmark to gauge the local currency's competitiveness.
One is the composition of the 23 currencies of Thailand's large trade partners and competitors. The other is the composition of Asian currencies.
"We have already been monitoring the baht. Our goal is to keep the impacts from the baht appreciation on the private sector at an acceptable level," she said.
At present, there are no stringent foreign-exchange regulations which may increase the pressure on the baht to appreciate.
A regulation revised in 2009 allows exporters to hold their US-dollar earnings for one year without having to exchange them into baht.
As well, the introduction of currency futures on the Thailand Futures Exchange in March last year was supposed to give businesses another tool to hedge currency risks.
The minimum requirement of the currency futures at US$1,000 is also suitable for SMEs, Ms Pongpen said.
To ease the private sector's concern, the central bank will promote available services and existing regulations among local businesses.
"Exporters should not compare the baht with the currencies of their trade competitors, as their economic fundamentals may be different from Thailand's," Ms Pongpen said.
"The baht can overshoot on some occasions. Therefore, the private sector should ensure they constantly hedge their currency risk."
Ms Pongpen said the strong baht will benefit both public and private investments, and the opportunity should not be overlooked.
In case of emergency, the central bank stands ready to use available tools to rein in the baht as needed, but their side effects will be carefully weighed.
FTI president Payungsak Chartsuthiphol urged the central bank to consider the baht relative to the units of other trade competitors such as Sri Lanka and Bangladesh in addition to those of Asean, China and India.
"Our request is for the central bank to look after the baht so it moves in the same range as regional currencies," he said.
The baht has eased for a few days, but the surge in the first two weeks of the year remains a cause for concern, he said.
Also yesterday, the Thai Chamber of Commerce (TCC) said it plans to ask the central bank to intervene in the currency market to ensure the baht is not too volatile and stays in line with other regional currencies.
Chairman Pongsak Assakul said the central bank should relax its rules on foreign currency holding as well as restrictions on hedging transactions to allow small businesses easier access to risk management instruments.
He also wants authorities to monitor capital inflows and provide more incentives for outbound investments while accelerating infrastructure projects.
Achana Limpaitoon, president of the Thai Autoparts Manufacturers Association, agreed with the TCC, saying an appropriate range for the baht is 30 against the greenback. "The rapid pace of the baht will make it tough for Thai producers to settle prices with foreign buyers," she said.
Separately, Virabongsa Ramangkura, chairman of the Strategic Committee for Reconstruction and Future Development, yesterday brushed aside growing concern about the country's public debt.
Instead, he urged the government and state enterprises to borrow more in baht given the country's ample liquidity and the strong baht. Thailand has the potential to raise public debt up to 80% of gross domestic product if the money is spent on infrastructure projects, which help boost the country's competitiveness. It was at 43.9% last September.
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Writer: Parista Yuthamanop, Phusadee Arunmas & Chatrudee Theparat