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6 August 2009

Thai central bank: Invest overseas to contain baht rise

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Bank of Thailand (BoT) Deputy Governor Suchada Kirakul on Wednesday disclosed that the central bank now allows a corporate entity with total assets of 5 billion baht or more to invest in securities and acquire a stake overseas as part of efforts to contain the baht appreciation, reported state news agency TNA.

At present, there are 503 companies whose asset size meets the required amount. They are permitted to invest in securities overseas in an amount of no more than $50 million and to acquire a stake in overseas business of no more than 10 percent of the registered capital.

The central bank gave institutional investors a green light to enhance the scope of their investment in local and overseas derivatives -- from investment with a purpose to hedge against risks to investment to get returns on derivatives.

In addition, the central bank gave exporters and importers approval to make derivative deals to hedge against currency exchange risks with commercial banks for product and service payment.

The BoT is confident the relaxation of the rule would help contain the strengthening of the baht and keep the capital inflow and outflow in balance, she said.

Currently, foreign capital has flowed into Thailand unilaterally as a consequence of the current account surplus of up to $10 billion. It made the baht hover around 33.80 baht to the US dollar.

Suchada affirmed the baht had moved more steadily than other currencies in the region. The currency is not stronger than those of rival countries.

Since early this year, the baht has appreciated by 2.4 percent while the US dollar has weakened by 4 percent. The Indonesian rupiah rose by 9.8 percent and South Korean won by 3.5 percent.

“We are unable to peg the baht. Adopting a flexible system looks better,” the deputy governor said. “We cannot predict whether the baht will depreciate to 37-38 to the dollar because the currency exchange rate always changes. The weakening or strengthening of the baht depends on the macro-economic policy and the US dollar movement,” she said. 


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