Thai Baht Hits New Nine-Year High

BANGKOK ~ The Thai baht hit a new nine-year high against the dollar on Wednesday amid growing speculation that the army-backed government will soon lift controversial currency controls, dealers said.

The Thai currency reached 35.07 to the US dollar in early morning trade, up from Tuesday’s finish at 35.14-15.

The baht has risen nearly 12 percent over the past year, prompting the government to impose the capital rules in December in a bid to halt the currency’s rise which has been dampening exports.

Exports are expected grow by 12.5 percent this year and are the main driver for Thailand’s economy, which the government projects will expand 4-5 percent in 2007.

The market has expected the new Finance Minister Chalongphob Sussangkarn to totally lift the remaining capital controls, causing worries among exporters that the Thai currency would rise further.

Chalongphob has previously come out against the capital controls but has sent conflicting signals on his policy since taking office last week.

“The baht got stronger this morning partly on panic selling of dollars by exporters due to worries that the capital controls would be removed soon,” said a Bangkok Bank dealer.

The baht appreciated in line with the Japanese yen, which was trading in a range of 116.00-10 to the dollar on Wednesday morning. Both currencies rose following the recent release of US economic figures that disappointed the market, the dealer added.

The capital measures, which required 30 percent of all incoming investment to be held by financial institutions for up to one year, sparked the biggest-ever one-day drop on the Thai bourse in December.

The plunge forced the central bank to quickly lift the regulations on money brought into Thailand to buy stocks, an embarrassing U-turn that damaged the government’s credibility in the eyes of investors.

Most of the controls have since been reversed. The central bank has even given many investors the option of avoiding the reserve requirement by fully hedging their investments against future changes in the exchange rate.

Thailand’s central bank chief, Tarisa Watanagase, said in a newspaper interview last week that she was waiting for the “right time” to completely lift the currency controls.

Filed under:

Comments are closed.