Baht Falls as Bank of Thailand Ask Banks to Reduce Speculation

By Kevin Lim and Anuchit NguyenMarch 27 (Bloomberg) -- The Thai baht dropped against the dollar after Bank of Thailand Governor Tarisa Watanagase said she had asked lenders to stop speculating on gains in the currency. The baht's rise to a nine-year high last week may crimp growth in exports as it makes goods more expensive in overseas markets relative to regional rivals. The Bank of Thailand confirmed it asked banks to adjust currency holdings in an attempt to curb excessive strength in the baht, Deputy Governor Atchana Waiquamdee said today. ``The central bank's comments probably caused people who had a speculative position on the appreciation in the baht to close such positions today, leading to declines in the currency,'' Hideki Hayashi, a foreign-exchange strategist at Shinko Securities Co., said in Tokyo. ``However, in the long-term, it is difficult to stop such a move.'' Thailand's currency dropped 0.7 percent to 35.08 to the dollar in onshore trading as of 10:09 a.m. in Bangkok, according to data compiled by Bloomberg. The baht declined 1 percent on March 23, the biggest loss in two months. The baht may rise beyond 34.50 against the dollar by the end of June, Hayashi said. The central bank also asked banks to report holdings of currencies every day, Atchana said in an interview with Business Radio today. The cooperation was sought through trade groups of commercial banks, she said. Currency Peg? Bank of Thailand in December imposed capital controls to penalize speculators in an effort to stem the baht's appreciation. The central bank also bought more foreign currencies with baht to slow its ascent, building foreign reserves to $69.2 billion from $55.3 billion a year ago. ``There are lots of rumors floating around, including the Bank of Thailand might consider a currency peg,'' said Philip Wee, senior currency strategist at DBS Bank in Singapore. ``We are more cautious this week in terms of selling the dollar.'' Thailand wants to slow gains in the baht, the best performer among the 15 most-actively traded Asia-Pacific currencies last year, to help exports, which account for about 60 percent of gross domestic product. ``We seek cooperation from the associations of banks to monitor their members and to stop those who try to speculate on the exchange rate,'' Tarisa said in Bangkok yesterday. ``We saw information that some banks have been manipulating on the baht,'' Tarisa said. She denied market speculation that the central bank may fix the baht at 36 to the dollar. March 27 Deadline There's a March 27 deadline for banks to reposition their dollar holdings to end-2006 levels, said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. ``But as noted, no official verification at this point.'' The Thai Bankers' Association wrote to lenders on March 23 asking them to reduce their bets against the dollar, the Nation newspaper reported yesterday, without saying where it got the information.

Cash the monies now and run?

The Bank of Thailand is trying hard to weaken the baht but they are having no luck.

Have no money, but only debt in bank...;P

so should i sell or buy??

Wait 5 mins!!! The experts are saying it will go back to 38 to 40 baht by the end of the year but who knows!!!

Thai Gov. try to hold Baht for 6 month already (after we changed the Gov.) and they lost money amount thousond billion (1,000,000,000,000 Baht) by bought dollar to keep in the central bank. if they don't do this, Baht must be around 30-31 B. per USD. long time ago.....

for your informations, in Economic, they 3 ways to encourage the eocomonic base. 1) to use money policy (by control the rate of the interest, both loan and saving) and they did already 2) to use the exchange rate policy (by control the exchange rate to support the main income of the country or whatever they want) use already also 3) to use the financial policy (by spend the money to the market....and they haven't done yet)......when they do, all the thing will be better BUT....it would be the same like Tasinomic...which is the current Gov hates the most to do.

so i try to say that....Baht will be falling down more and more...if u want to make money....u can buy Baht. but i don't know when it gonna be like 40 again. but the more u buy baht, u hurt the economic of Thailand. your choice......

What a shame I get ££££'s...NOT!!! And Cheers

*sigh* Appreciation in Thai baht will cause some problem to my work, arrghh I hate the damn excess report....... BOT always got us headache, being a foreign bank...

Baht appreciation is very normal.. I mean, there's just too much money in western economies that foreign funds keep injecting capital in emerging markets such as Thailand. Capital inflows into developing countries are not necessarily a good thing. Currency appreciation discourages the country's exports, especially a small economy like Thailand whose exports are a big portion pf GDP. Plus, these are very liquid and speculative investments.. foreign investors can just pull out the capital when things go south.. and this capital doesn't have a chance to benefit domestic industries yet. The good thing is- it's a good time for Thai companies to pay off foreign loans since the dollar is now so cheap. But definitely, baht appreciation is not good for people working abroad like me. Compared to when it was 40 THB/USD, I basically have THB 7 less for each Dollar I earn...