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Baht Appreciation
July 19, 2007

Central bank to allow dollar deposits
The Bank of Thailand said on July 19 it would allow the public to open US dollar-denominated bank accounts in a bid to curb the strong baht, which has remained at 10-year highs against the greenback, AFP reported.

Under the measure, ordinary Thais can own domestic bank deposits worth up to 100,000 dollars, central bank governor Tarisa Watanagase said, adding the scheme was part of a package aimed at pressuring the baht.

The central bank, under pressure from the army-backed government over the volatile baht, will present the package to Prime Minister Surayud Chulanont's cabinet for approval on July 17.

Under current rules, Thai firms can hold dollar-denominated bank accounts here but the public was not allowed to do so.

On Wednesday, the central bank slashed its key interest rate by 25 basis points to 3.25%, the fifth consecutive rate cut this year, amid growing pressure to rein in the rising baht.

The strong baht has put pressure on exports, the key driver of the economy, as it makes Thai goods less competitive abroad and cuts the value of repatriated profits.

The rate cut had little impact on the baht, as the Thai currency was quoted at 33.49-51 to the dollar in morning trade on July 19, compared to the close of 33.46-48 on July 19.

In the offshore market, the baht stood at 30.15-25 to the dollar, and Tarisa said she hoped the exchange rate gap between the onshore and offshore markets would narrow soon. AFP

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