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Published on April 18, 2008

Anoma Srisukkasem

The Nation, agencies

The unit opened at Bt31.42 to the greenback in the morning, up 0.35 per cent from the end of last month. It reached an intraday high of Bt31.31.

Selling by exporters was blamed for the continued strengthening of the baht, as well as the flight from the dollar. The baht was also buoyed by foreign investors seeking speculative gains in global stocks, including Thai stocks.

The trend is expected to reverse in the second half of the year when the current-account surplus narrows as public investment rises and the US sub-prime crisis settles down.

Earlier, the Bank of Thailand required financial institutions to cover their spot positions using reference rates, including the average interbank rate, for their dollar position, which caused varying practices among banks.

Yesterday, the central bank issued a circular asking financial institutions to book their foreign-exchange spot positions on their balance sheets in terms of baht, in line with international standards.

Forward transactions are excluded.

Financial institutions have to convert their spot forex positions into the baht using the midpoint of average buying and selling rates posted on the central bank's website at the end of each month.

If a foreign currency is not published on the website, cross rates should be used. The currency would be converted into the dollar before being converted into the baht.

The requirement extends to foreign subsidiaries of local financial institutions so they can be consolidated into their parent's balance sheet.

Earlier, they were also required to submit capital adequacy ratio reports in line with international standards, using the midpoint between average buying and selling rates.