Bank of Thailand takes action to curb Thai baht’s strength
The Bank of Thailand has moved forward measures, originally meant to begin early 2021, but most of which will now take effect from end of this month. The end result is that the new rules will make it easier for Thais to shuffle money overseas and invest in foreign assets. It will also make is easier for Thai citizens to hold foreign currency in local banks. The new rules will also require the registration of local and overseas bond investors.
“Following the U.S. elections and positive news on Covid-19 vaccine development, investors have turned toward investing in emerging markets, including Thailand. The situation has resulted in strengthening the baht quickly and can impact economic recovery.”
“The registration of bond investors will allow close monitoring of investor’s behaviours and thereby enable the implementation of targeted measures in a timely manner.”
Last week the Bank of Thailand assessed that the Thai baht’s recent rapid gains could affect the country’s “fragile” economic recovery. The Thai government has called on the central bank to do its best to use what tools it has at its disposal to restrain the baht to protect exports.
Khoon Goh, head of Asia research at ANZ Banking Group, says that he central bank also will continue to resort to direct intervention in foreign-exchange markets.
“The issue here is that local investors have a very strong home bias. Making it easier to invest overseas may not actually encourage them to do so.”
The Thai baht has been the 2nd best performer in Asia this month after foreign investors turned net buyers of almost $2.4 billion of bonds and stocks as appetite returns for riskier emerging-market assets amid a weak dollar, according to Bloomberg.
The Thai baht had recently rallied 8.8% from this year’s low in April, hitting a 10 month high last week.