The private sector is stepping up its pressure on the Bank of Thailand to ease the baht's strength, saying the central bank should look at the possibility of an interest rate cut and tax measures to cope with foreign capital inflows.
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), which comprises the Federation of Thai Industries (FTI), the Thai Chamber of Commerce and the Thai Bankers' Association, met yesterday to discuss the impact of the strong baht, which was quoted yesterday at 29.75 baht against the US dollar.
JSCCIB chairman Payungsak Chartsuthipol said strong foreign capital inflows had strengthened the baht and short-term fluctuations had adversely affected exporters.
Mr Payungsak, also the FTI chairman, said the committee will meet with the Commerce Ministry this week to discuss ways to maintain the competitiveness of exports.
"We understand that the Bank of Thailand has monetary measures to oversee the currency's movements but needs to minimise impacts on the overall economy. All we want is to have the baht move in the line with its peers in Southeast Asia and four other countries in the region," he said, referring to China, India, Bangladesh and Sri Lanka.
The baht has appreciated continuously against the dollar since the start of the year as the second-strongest currency in the region after the Malaysian ringgit, he added.
Central bank senior economist Songtham Pinto said it has monitored the baht closely so that it is prepared to take necessary actions.
The bank found that capital inflows reflected both international trade and investors' short-term daily movements.
Mr Songtham said the interest rate is not the only factor that could draw short-term foreign capital inflows. Investors would shift funds to arbitrage interest rate differentials, foreign exchange gaps and stronger economy prospects.
"In Taiwan, for example, its central bank reduced the interest rate significantly in the past, yet it continues to attract capital inflows," he said.
Foreign capital inflows have not spurred inflation so far, although the consumer price index spiked to a 10-year high in January.
The increase in the Stock Exchange of Thailand index and the domestic economy in general have not been high enough to push up inflation, Mr Songtham said.
The central bank is maintaining its inflation forecast at 2.8 % this year.
Pongsak Assakul, chairman of Thai Chamber of Commerce, said small exporters have been particularly affected by the baht's fluctuations.
Thai Bankers's Association president Chartsiri Sophonpanich said all commercial banks will try to look after their export-oriented customers and advise them to use financial measures to cope with currency movements.