Local exporters, like most of their peers worldwide, almost always trade in US dollars, which have drifted lower against most Asian currencies over the past few months.

Caretaker Finance Minister Thanong Bidaya yesterday said the situation should not be worrisome because the currency strengthened as a result of foreign investors bringing huge amounts of capital into the region.

The baht has gained 3-4 per cent against the dollar since the start of the year, in line with other regional currencies, he said. It traded around Bt37.9 to the greenback yesterday.

Exporters said they might be forced to increase prices (quoted in dollars) in the third quarter to offset foreign exchange losses.

Wisit Thanapatanavibul, president of Wisirint Co Ltd, a jewellery producer, said the baht's strength trimmed profits by 5-7 per cent last month.

"We may consider increasing prices at the start of the third quarter," said Wisit. The firm could not hike prices yet because orders had already been placed at old prices quoted in dollars.

Wisinrint exports 95 per cent of its products, mostly to the US, Europe, and Asia.

"Most exporters are praying for the baht not to be too strong. They wish it would go back to Bt39-Bt40," he said.

Thanong said he had spoken with caretaker Commerce Minister Somkid Jatusripitak, who agreed that "the current baht level is still not worrisome."

He earlier said exporters would feel more comfortable if the baht was at Bt39.

Yet considering that other regional currencies like the Philippine peso and Indonesian rupiah, were also gaining steadily against the greenback, the baht's rise is unexceptional. The Malaysian ringgit and Indian rupee were among the first to appreciate in the region, not the baht.

Much of the cash inflow to Asia comes on the back of growing expectations that Asian economies should outpace America's with the greenback looking to correct further.

At the same time, caretaker Deputy Commerce Minister Preecha Laohapongchana said the ministry did need to adjust the export growth target for this year because of the baht's slight gains.

The ministry expects export growth to top 17.5 per cent to US$130 billion (Bt5 trillion).

Preecha suggested that exporters might have to increase prices in the third quarter to offset foreign exchange losses.

He went further to say exporters should take advantage of the situation to import capital goods such as machinery to expand capacity as the current exchange rate made overseas goods much cheaper.

Exports in February grew 23.3 per cent year on year to $9.4 billion, outpacing January's 14.5-per-cent growth to $8.81 billion, according to the central bank.

Meanwhile, Phatra Securities Plc said the central bank was likely to leave the baht untouched at present to tame inflation.

"Our conclusion is that the BOT is less likely to intervene and will allow the baht to appreciate in accordance with market forces. In this sense, the baht may stay be stronger (at Bt37.5-38.5) for a longer term," Phatra said.

According to Phatra, based on the argument that Thailand had been experiencing a higher rate of inflation than its trading partners, the BOT would be willing to allow the baht to remain strong for awhile.

To curb inflation, the bank may choose to reduce credit-card growth and personal loans as well as raise interest rates, said Tarisa Wattanagase, deputy governor of the central bank. "This is to reduce overheating in some parts. If we see the symptom [of too much growth], we will apply these measure among others," she said.

Naris Chaiyasoot, director-general of the Fiscal Policy Office in the Finance Ministry, said the ministry estimated that the baht would hover between Bt38.80 and Bt40.40 a dollar.

If the currency strengthens by Bt1, it will dent GDP growth by 0.29 per cent, Naris said. Based on that scenario, exports would drop 0.2 per cent from the target level, while imports grow 0.4 per cent.

Adisai Dhummakupt, executive director of the Thai Trade Representative in Pretoria, South Africa, said the baht's appreciation could decrease competitiveness of Thai exports like rice.

He said importers might turn to cheaper rice from Vietnam.

Surasak Rianngkrul, executive director of the Thai Trade Representative in New York, said a stronger baht should not have a significant impact on export growth this year.

Thai exports to the US should grow 15 per cent as targeted. In the first two months, exports to the US grew by 16 per cent from the same period last year.

Mallika Puajinsdanetr, executive director of the Thai Trade Representative in Shanghai, China, said the baht's strength had no effect on exports to China because the yuan had also appreciated.

She suggested that exporters not rely on the exchange rates but learn to improve the quality of their goods to better compete globally.

Chantra Purnariksha, director-general of the Export Promotion Department, said most international traders accepted that Thai prices are be higher, but that the goods are worth it due to better value and quality.

For instance, a leading US retailer, Crate and Barrel, insisted it would continue to buy Thai products at a premium, as long as the quality was stable and delivery was punctual, he said.

Petchanet Pratruangkrai,

Anoma Srisukkasem

The Nation