Thai baht soars to two-year height
BANGKOK, 2 September, 2010 – Thailand on Thursday ordered the central bank to keep a close eye on the baht and “prepare measures” after the currency soared to a 29-month high against the US dollar, the finance minister said.
Travel industry sources expressed concern as the Thai baht also gained against the UK pound and Euro. They estimate a strong baht could raise the cost of travel to Thailand by as much as 15% when compared with costs in 2009. A stronger baht makes Thailand more expensive for travellers from key markets such as UK and all the Euro currency countries.
Premier Abhisit Vejjajiva called a special meeting with top economic officials, including the governor of the Bank of Thailand, after the baht hit its highest peak since April 2008.
The unit reached 31.16-18 baht to one dollar at one point in Wednesday morning trade, having climbed about 5 to 6% this year.
“There is concern over currency speculation. We have ordered the Bank of Thailand to examine and prepare measures for it,” Finance Minister Korn Chatikavanij told reporters, without specifying what the measures were.
But he added that the Bank of Thailand said the currency’s strength was mostly based on the positive balance of trade – reflecting robust exports – rather than speculation.
Following the meeting, central bank governor Tarisa Watanagase said Thailand’s currency appreciation was in line with other countries in the region.
“The measures we have now are enough to deal with the current strength of the Thai baht. However, we have to keep a close eye on it,” she said.
Fitch ratings said Wednesday that Thailand’s economic performance had “proved surprisingly robust to global and domestic turbulence in 2010″.
Andrew Colquhoun, head of Fitch Asia Pacific sovereigns, said resilient economies in the face of the global downturn and market expectations of rising interest rates have seen currencies soar in the region.
This has also attracted foreign investors searching for returns as central banks in the West keep rates at rock bottom.
Colquhoun said this has caused fears that inflows of overseas funds could interfere with economic oversight.
“Money is looking for some yield and there is a concern that that may complicate monetary management,” he said.
Last month Thailand raised its benchmark interest rate by 25 basis points — for a second consecutive month — to 1.75 % after an unexpectedly strong performance by its economy. The July hike was the first in almost two years.
Thailand may also have seen a rebound from the negative sentiment caused by deadly street protests in April and May, he added.
The kingdom was rocked by two months of mass opposition protests, which paralysed parts of Bangkok and sparked clashes with security forces that left 91 people dead, ending with an army crackdown on May 19.
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