The Thai Baht has become strongest in 16 years, quoted at 29.13 Baht against the US dollar today, which, according to an analyst, has led to massive sales of the greenback offshore and brought down the SET index by 47 points.
CIMB Bank (Thailand) Assistant President Banluesak has expressed his view that the Thai Baht has strengthened too quickly. He urged the Ministry of Finance and the Bank of Thailand (BoT) to collect foreign currency transaction taxes( Tobin Tax) as a way of keeping the influx of foreign capital under control. He said the Thai Baht is now the strongest currency in the region.
It has been reported that as the Thai currency has risen to its highest level against the greenback, stock investors have begun to unload their shares, forcing the stock index to plunge 47 points and gold price to decline by 150 baht. Mr Thiti Tantikulanan, Head of Capital Markets Business Division, KASIKORNBANK, has disclosed that the influx of foreign capital shows no sign of abating as foreign investors continue to invest in the Thai bond market, with the current foreign holding in Thai bonds reported at 810 billion baht, the highest in the market history.
However, the majority of those investors are not investing in the industrial sector but rather taking advantage of the stronger Baht. Mr. Thiti predicted that the BoT might impose short term measures to curb the influx.
The Thai government will not respond with any special measures to tackle the baht’s rapid appreciation, the deputy prime minister/finance minister said today.
Kittiratt Na-Ranong told reporters after the economic ministers’ meeting that concentration will be given to stabilising the baht without the use of unnatural means, whether the Tobin tax which aims at penalising short-term currency speculation, interest rate adjustment or prevention of foreign capital inflows.
Those measures will have a negative impact on foreign investors’ confidence in Thailand, he said.
“We have measures to closely monitor the strengthening Thai currency,” he added. “Let us ignore the unnatural methods in the past which posed more disadvantages.
“We are currently exercising natural measures based on the responsibilities of each agency. The Finance Ministry is in charge of finance policy and [the country’s] investment plan while the Monetary Policy Committee is responsible for the interest rate. It is a body of individuals with which we cannot interfere.”
Mr Kittiratt’s statement was a reversal from his stance earlier in the day when he said he would discuss the Thai currency’s successive appreciation and the policy interest rate with the central bank chief in the economic cabinet meeting and that the government’s intention should not be misinterpreted as a political intervention.
Thai stocks dropped over 30 points today amid fears of possible measures to weaken the baht.