BOT Governor Tarisa Watanagase yesterday said speculators could not successfully arbitrage the baht or take profits from the current gap in its value by buying and selling simultaneously in the onshore and offshore markets.

She said that up to now, non-residents had not moved baht liquidity out of the Kingdom, because they would be subjected to the remunerated reserve requirement when they came back in. Therefore, the baht in the offshore market has appreciated significantly.

More recently, however, the offshore baht has eased in strength, in line with a reduction in transactions in the market. Earlier, the transaction number accelerated significantly, because of high demand for baht.

Tarisa told a property-market seminar that the offshore baht could be about 30 per cent stronger than the level of the onshore market. It is currently about Bt2 higher than the onshore rate.

"[Speculators] cannot take profits by arbitraging the baht in the dual market, so they have tried to net their obligations with non-delivery forward. If the dual market were linked, the baht [value] would not have been this different," she said.

Tarisa said offshore transactions would eventually return to the domestic market, because non-residents could not seek baht liquidity abroad. They will finally conduct their transactions with local banks.

The central bank has warned exporters to quote their selling prices using the baht's onshore price rather than its offshore price, which is higher than the baht's actual value.

The BOT governor said the withholding measure was introduced because the central bank considered maintaining economic stability the first priority.

Although the measure has already been relaxed for stock-market and foreign loans, the central bank must take time to consider whether similar waivers should be given to foreign investment in property funds.

She said the overall size of property funds grew rapidly, by 118 per cent, last year and was expected to expand considerably this year.

Anoma Srisukkasem

The Nation