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July 5, 2007

Central bank should slow baht appreciation
Senior officers of four private-run business organisations Thursday urged Bank of Thailand (BoT) governor Tarisa Watanagase to find ways to slow the appreciation of the Thai currency, the baht, which is surging sharply against the greenback, saying that the strong baht would hurt exporters.

Led by Thai Chamber of Commerce chairman Pramon Suthiwong, the four business associations met with Mrs. Tarisa as the baht appreciated to Bt34.10 against the dollar, rising to the strongest level since the central bank floated the baht and sparked a regional meltdown on July 2, 1997.

Mrs. Tarisa, however, told them that the current situation offers a good opportunity for the private business sector to import raw materials and machinery while the baht was strong because their costs would be cheaper.
Requests made by the private sector for the BoT to assist in preventing the baht from becoming too strong were being addressed by the central bank, but she could not specify how strong the baht could become.
Chamber vice chairman Phongsak Assakul said exporters are being hurt as the baht has appreciated too quickly in the past two days. Consequently he had requested the BoT to oversee that the baht move in the same direction with Thailand's competitors including China, Vietnam and India.

It is understandable that it is difficult for the baht to hover around Bt37-38 against the dollar now, he suggested, but measures should be made to prevent the currency from moving at below Bt34 to the dollar because exporters would be hit hardest.
Agriculture, textile and small- and medium-sized entrepreneurs will be impacted in the long-term because they are the ones using most locally-made raw materials, said Mr. Phongsak. The associations will discuss with members on trying not to sell US dollars into the market because it will deteriorate the situation.

Manufacturers have tried to lower production costs and expenses in the past, but problems cannot be resolved quickly, certainly not in a day, Mr. Phongsak said, as the baht strengthened about 5 per cent in 2006 and their earnings also dropped, said Mr. Phongsak.

Mr. Phongsak said the suggestion made by Mrs. Tarisa for local businessmen to import raw materials and machinery while the baht is strong is impractical because operators are now confronting production problems, and they also cannot sell their products.

The baht was quoted as high as Bt33.99 against the dollar on the onshore market versus Bt34.18 Wednesday. TNA

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