Market concern over baht breaking 33-to-dollar mark

The baht opened at 33.13/15 yesterday, stronger than last Friday's close of 33.15/16, and moved to a stable level during the day. It had reached a historic 10-year high at 33.13 against the greenback on Friday amid rising concerns that it would break 33 to the dollar this week due to the continuing fall of the dollar precipitated by the US economic slowdown.

BOT Governor Tarisa Watanagase said the central bank had properly managed the currency in accordance with guidelines. She said the baht remained in line with other currencies in the region.

"The baht has not appreciated more than other currencies and we have not yet lost our competitiveness," she maintained.

Her comment was in reaction to Finance Minister Chalongphob Sussangkarn's earlier statement asking the BOT to manage the baht better as the Thai currency has moved stronger than regional currencies.

The dollar yesterday depreciated after the announcement of a US trade deficit of US$63 billion (Bt2 trillion) last November, the highest in 14 months. This was a result of accelerating imports of goods, particularly oil, while exports grew only 0.4 per cent.

The baht is 1.63 per cent stronger from the end of last year, compared with the 1.2-per-cent appreciation of the Singaporean dollar, 1.84 per cent for Malaysia's ringgit and 1.85 per cent for the Philippine peso.

Tarisa said she had reported to Prime Minister Surayuth Chulanond last Friday on how the BOT had managed the baht. The central bank has monitored the baht and continuously managed it.

Tarisa dismissed grave concerns that the depreciation of the US dollar could lessen the value of Thailand's international reserves. She said the central bank had for years reduced the proportion of the US dollar in Thailand's portfolio.

Sukit Udomsirikul, head of research at Siam City Securities, said the baht would possibly grow stronger over the next three months if the US Federal Reserve slashed the rate in this month's meeting to halt volatility in global financial markets. He urged the BOT to manage the baht continuously to reduce its volatility, in order to facilitate exports.

"It is currently difficult to manage the baht amid unavoidable beleaguering factors. The central bank does not need to weaken the baht, just don't let it be stronger than other currencies," said Sukit.

Market experts have forecast that the Fed would cut the federal fund rate by half a percentage point in the next meeting and at least a quarter percentage point in the meeting in March.

Meanwhile, Tarisa downplayed concerns over the problem of inflation, saying consumers should not be too worried about rising prices of oil and other consumer goods, because the oil-price hike could be a temporary problem.

"Consumers should not be afraid and panic in advance because inflation has not become a problem yet. High prices could be prolonged or turn lower anytime," she said.

The Monetary Policy Com-mittee will meet tomorrow to revise its economic outlook and make a decision on the policy interest rate before its formal announcement on January 25.

Tarisa said the central bank took into account both economic growth and inflation in order to consider which is the problem that most needs correction.

The crude-oil price continues to decline amid concerns demand will turn lower, because of the US economic recession.

Anoma Srisukkasem

The Nation