THAI companies should capitalise on the strong baht to import more machinery and equipment that will enable them to boost productivity and reduce costs, the Bank of Thailand (BOT) and Thai National Shippers' Council (TNSC) say.
If companies seize on this opportunity, they will be able to add more value to their products and benefit from higher pricing power, the two organisations say. The TNSC's management team yesterday met their peers from the BOT for a discussion and exchange of information on the currency situation and the Thai economic outlook.
Chantavarn Sucharitakul, the BOT's assistant governor, said that the central bank had made interventions in some periods when the baht appreciated too fast as|a means to extend the adjustment time for the private| sector.
Such interventions were not aimed at giving Thailand any trade advantages against other countries or resisting the direction of markets, but were intended to help the private sector make the required adjustments, she said.
When the baht appreciates too quickly and such gains are not in line with the country's economic fundamentals, the central bank intervenes to lessen the impact on business operators, she said, adding that this capacity reflected the higher foreign reserve in 2017.
The appreciation of the baht and its regional peers from early 2017 resulted mainly from the US dollar's depreciation and Thailand's current account surplus.
Some capital flowed into securities. Overall, the baht moved in the same direction as its regional peers with medium volatility, Chantavarn said.
Amid the uncertainties over international trade conditions in light of international political issues and industrialised countries' economic policies, both the BOT and TNSC are encouraging business operators to hedge against foreign exchange risks.
It is suggested they could start with invoicing in baht or other currencies that move in line with the baht, or with the currencies of Thailand's trade partners, instead of the US dollar. Now, about 80 per cent of business operators write their invoices in US dollars, even though Thailand's trade with the United States accounts for less than 20 per cent of the total.
Companies that are required to make payment in foreign currencies in the future could deposit the funds in foreign currency deposits (FCD) to lessen the impact that may arise from the currency fluctuations, Chantavarn said. The central bank has been promoting since late last year a foreign exchange options project for small and medium-sized enterprises (SMEs). About 2,000 SMEs have received coupons under the project and each of them can purchase options or lock in the rates of currencies to hedge against foreign exchange risks for export worth about US$100,000, Chantavarn said.
The BOT and the TNSC will help expand the project into the latter's members, she said.