The Bank of Thailand has allayed businesses’ unease over the baht’s gain, saying the currency could reverse its trend and two-way movements vis-a-vis the dollar/baht are expected to increase next year.
Global investors are starting to view the baht as overvalued, given the country’s economic slowdown, the narrowing current account surplus and a razor-thin spread between the Thai and other nations’ rates, said central bank deputy governor Mathee Supapongse. This means the currency might no longer be seen as a safe haven, he said.
The Thai policy rate is lower than the US and almost the lowest in Asean, weakening attractiveness for speculation, said Mr Mathee.
“The baht is starting to reverse its [upward] trend. We did not do anything, but the market views the baht’s upside gain as limited,” he said.
The baht over the past couple of years largely strengthened against the greenback. The local currency advanced around 7.5% versus the dollar so far this year, making it Asia’s top performing currency.
There are higher short positions in non-resident baht accounts, said Mr Mathee, though earlier such accounts took a long position on the baht.
“The central bank does not feel complacent over the recent baht surge. We’ve imposed measures to rein in the currency including tightening regulations on non-resident baht accounts and periodically stepping in the foreign exchange market to tame baht gains. The outcome of the four latest measures has not been significant,” he said.
The central bank last month relaxed regulations related to exporters’ foreign currency proceeds and foreign securities investment to encourage capital outflows and curb the baht’s strength.
Those included allowing exporters with proceeds below US$200,000 per bill of lading shall to keep the proceeds abroad, without a time limit, a relaxation from the current $50,000 threshold, enabling retail investors to invest up to $200,000 per year in foreign securities, without having to invest via a Thai intermediary, and liberalising outward transfers, which are currently allowed based on a positive list of specific purposes, with exception for a few specific purposes.