Although Thailand managed to avoid a place on the US watch list for currency manipulation, the Bank of Thailand is still wary on the matter after the US Treasury tightened its criteria, says the central bank's chief.
Thailand cannot afford to be overconfident and the central bank will continue monitoring the situation, said governor Veerathai Santiprabhob.
The US Treasury Department issued its semi-annual foreign exchange report to Congress, in which no country was labelled a manipulator but nine were on the watch list because they met some of the criteria. There were five new additions -- Ireland, Italy, Vietnam, Singapore and Malaysia -- plus China, Japan, South Korea and Germany. India and Switzerland were removed from the list.
According to the amended criteria, countries with a current account surplus with the US equivalent to 2% of GDP are put on the monitoring list, down from 3%. The other two criteria are persistent one-sided intervention in the foreign exchange market with net purchases of at least 2% of GDP, and a trade surplus of at least US$20 billion with the US. Countries that meet two of the three criteria are put on the monitoring list.
Even though a country labelled as a currency manipulator to gain a trade advantage with the US is not subject to any penalty, financial markets could be rattled and trade sanctions could still be imposed.
"Thailand was not included on the list, reflecting that we do not have a policy of currency intervention to gain a trade advantage," Mr Veerathai said.
Thailand's trade surplus with the US stood at $12.9 billion last year, while the current account surplus was 7.4% of GDP.
The baht is the best-performing currency in Asia, with a 2.2% gain against the greenback this year. According to Bloomberg, the currency has risen 0.3% against the dollar in May as of 11am in Bangkok, making it the sole gainer among developing-nation currencies this month.
The firmer baht could be due to easing worries over a political stalemate after the Palang Pracharath Party took the lead in forming a new government. Also, Tuesday saw the highest net offshore fund influx into Thai stocks in more than six years on speculation that Thailand would have a larger weighting in the MSCI Emerging Markets index.
Foreign investors who became net buyers of Thai debt this month for the first time since November also gave a boost to the baht.
Mr Veerathai said the central bank would continue to manage the baht properly as per usual and monitor the escalating trade brawl between the US and China.
On Wednesday, the central bank in collaboration with 22 financial institutions and corporations introduced letter of guarantee (L/G) service on blockchain technology.
Under the cooperation, commercial banks led by Bangkok Bank, Krungthai Bank, Siam Commercial Bank, Kasikornbank, Bank of Ayudhya and TMB Bank set up a new company called Blockchain Community Initiative Thailand (BCI), providing the innovative financial service, described as the world's first blockchain-based L/G issuing firm.
BCI Thailand has registered capital of 530 million baht.
Blockchain-based e-L/G service will improve business efficiency with more convenience, speed and security and cut down operating costs, Mr Veerathai said.
Predee Daochai, chairman of the Thai Bankers' Association, said the financial service is scheduled to be launched as a pilot project next month, with a full array of services expected in the third quarter.
There are around 500,000 L/G documents issued a year with a total value of about 1.35 trillion baht.
Some 50% of total L/G documents are expected to be issued by blockchain technology within three years.
