Baht cools as central bank considers measures to temper rally

Baht cools as central bank considers measures to temper rally

The baht is heading for the first weekly drop in a month after the Bank of Thailand pledged new measures to temper a rally. (Bangkok Post photo)
The baht is heading for the first weekly drop in a month after the Bank of Thailand pledged new measures to temper a rally. (Bangkok Post photo)

The baht is heading for the first weekly drop in a month after the central bank pledged new measures to temper a rally that threatened to derail a nascent recovery in the trade-reliant nation’s exports.

The Bank of Thailand, which “stepped in” to cool the rally this week, is scheduled to hold a briefing on the country’s “forex ecosystem” on Friday, a day after Governor Sethaput Suthiwart-Narueput said “appropriate measures on the baht are still being considered.”

While analyst have been left to speculate on the nature of measures the central bank is likely to take, foreign investors turned net sellers of the nation’s sovereign bonds for a second time this week. The baht has weakened more than 0.5% since Nov. 13, after rallying over 3% in the previous three weeks.

Citigroup recommended cutting exposure to the currency, saying measures that may be announced on Friday can cause some unwinding of positions. “Draconian measures” like capital controls are not expected as policy makers understand their lasting damaging impact, Gaurav Garg, head of Asia FX and rates strategy in Singapore, wrote in a note.

The central bank’s pledge to stem the baht rally follow its assessment earlier this week that the currency’s rapid gains may affect Thailand’s “fragile economic recovery.” The government also called on the monetary authority to restrain the baht to protect exports.

Even after this week’s decline, the baht is the best-performing currency in Asia this month after the Indonesian rupiah. Foreign investors have become net buyers of Thai assets in November, with net inflows totaling almost US$2.4 billion of bonds and stocks. Risk appetite returned for emerging-market assets amid a weak dollar.

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