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ASEAN STOCK WATCH 13  September  2010

ASEAN Currency News‏

Shayne Heffernan

ASEAN currencies rallied last week, led by the Thai baht, as fast economic growth drew funds to the region and data in the U.S., China and Japan brightened the outlook for exports. The baht appreciated 1.2 percent this week to 30.83 per dollar as of 3:22 p.m. in Bangkok yesterday.

The baht rose for a sixth week, the longest run of gains since March, and strengthened beyond 31 per dollar for the first time since 1997 as exchange data showed overseas investors bought $133 million more Thai shares than they sold in the past four days.

The currency has climbed 4.5 percent since July 23, when the Bank of Thailand predicted that gross domestic product will expand as much as 7.5 percent in 2010.

Thai Prime Minister Abhisit Vejjajiva should show “strong signals” that the government would not allow the Thai Baht to rise any further against USD, a leading industrialist said on Friday.

“The government has not shown any of such signals. If the baht rises any much further, our industries will fail to adjust,” Payungsak Chartsutipol, Chairman of the Federation of Thai Industries (FTI), the leading association of multi-sector industries, told a press conference.

Payungsak said the Bank of Thailand (BoT), the country’s central bank, should also intervene to prevent the Thai currency from rising faster than other currencies in Southeast Asia. The Baht climbed to a range of 30.63 to 30.73 Baht against the USD Thursday, the highest level in 13 yrs, said a statement issued by the FTI after a meeting over the impact of the rising Baht.

Since the beginning of this year, the Baht has risen 2.52 baht, or 7.60%, against USD, one of the highest appreciation rates among all currencies in the region, the statement said. FTI said in the past month, the Baht has soared 3.74% against USD, and if the appreciation continues like this, the Thai currency could rise to 29.50 Baht to 1 US $ by the end of October.

Payungsak said export oriented industries have been “severely” affected by the rising Thai currency such as garments, textile and agricultural products, adding that for every 1 Baht appreciation against the USD, it would cost the auto industry 6B Baht (US$195M).

The chairman also said as inflows of short-term funds to speculate in Thai stocks and bonds markets have contributed to the Baht’s appreciation, the government should come up with measures to discourage such inflows.

In an interview with CNBC, Malaysian PM Mr Najib said the majority of investors were not concerned about the ban on the offshore ringgit trade, but he did not rule out lifting it. ‘We are open to it (allowing the ringgit to trade offshore),’ Mr Najib said in response to a question from the interviewer. ‘We are quite adaptive and if we think it’s going to help us and the economy, we would review the situation.’

Mr Najib said the ringgit, which has risen by 10.18 per cent this year against the dollar, now reflected the economy’s economic fundamentals and that its rise had not had a negative impact on exports.

Offshore trading of the ringgit was banned in 1998 at the height of the Asian financial crisis. However, the central bank has recently allowed the settlement in ringgit of trade in goods and services. Both the government and the central bank have frequently said in the past that they would consider allowing offshore ringgit trade when conditions were right.

The ringgit has surged this year after under peforming in 2009 on the back of a series of rate hikes from the Malaysian central bank, Malaysia’s stronger than expected economic growth and flows into the country’s large bond market.


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