The Bank of Thailand (BOT) has urged Thai banks to adjust their net foreign exchange position at the end of each day, and foreign banks within the following day, a source in the financial community said yesterday.

Given the rapid strengthening of the baht, the central bank is taking a close look at the foreign currency trading of commercial banks by asking them to report their net foreign positions on a daily basis.

Deputy BOT Governor Atchana Waiquamdee yesterday said it wanted to know whether the banks' currency trading was normal in relation to export transactions.

Some banks have been blamed for being involving in baht speculation by selling US dollars into the market, putting additional pressure on the baht initially spurred by exporters. Exporters have largely sold off their dollar incomes amid a concern the BOT would revoke the capital reserve requirement.

On Monday, the central bank requested Thai and foreign banks to submit a daily report of the net foreign exchange position. Earlier, the central bank got delayed information from the banks, so it could not track trading behaviour.

"There was self-fulfilling behaviour from exporters and some banks. So we have asked two associations to monitor and we will have face-to-face meetings with banks engaged in abnormal trading," she said.

The BOT also insists that it will not adjust the maximum net foreign position of 20 per cent of first-tier capital. The position represents the bank's number of foreign currencies in portfolio.

However, banks were asked to adjust their net position to be in the same level as they were at the end of last year.

Atchana said each position at the required periods was based on an assumption that the bank realised it was the most suitable level.

The BOT has repeatedly insisted it will neither adopt a fixed-exchange-rate regime nor impose a band range, while many countries are following the managed-float system.

Central bank Governor Tarisa Watanagase said the situation in the baht market had been improving and was expected to get better. 

Reacting to the latest BOT request, Kasikornbank president Prasarn Trairatvorakul said he did not understand how banks' position adjustment could help the baht. He believes that banks made long positions in the baht, not with the purpose of speculating but to prepare for their customers' orders.

He said the bank's position was now in neutral, while it had a little long position at the end of last year.

Meanwhile, the chief of the Export-Import Bank of Thailand has urged the central bank's Monetary Policy Committee to cut its one-day repurchase rate by more than 25 basis points at the next meeting, and revoke the 30-per cent capital reserve requirement.

Abolition of the requirement would destroy the two-tier Thai baht markets, which is a sign of the baht crisis, Narongchai Akrasanee, the Exim Bank chairman said.

Although the measure is relaxed for a certain level, its effect remains intact, he added.

Earlier, Finance Minister Chalongphob Sussangkarn said that the measure has had little impact because of exemptions for inflows of fully hedged through foreign exchange swaps.

Many economists suggested the MPC lower its signal policy rate by at least 50 basis points on April 11 with the aim of weakening the baht.

Tak Bunnag, Bank of Ayudhya's executive vice president, said yesterday the baht had weakened slightly and moved in a range of 35.03/35.10 against the dollar.

The baht had stabilised after the market got clearer information from the BOT about the banks' foreign exchange position adjustment.

However, the baht is likely to appreciate further and Thai exporters would further sell the greenback on expectation that the baht would continually appreciate, in line with regional currencies.

He said it was possible the central bank would introduce new measures to depreciate the baht.

But in the short term, the central bank would monitor its latest measure (banks foreign exchange position adjustment), thus new measures would not be needed.

He said the interest-rate policy would help the baht's stability.

However, the baht is expected to move in the range of 35-36 against the dollar in the short term.

Yesterday, the baht opened at 35.00/35.05 to the dollar and closed at 35.01/35.03.

Anoma Srisukkasem

Somruedi Banchongduang

The Nation