Thailand does not intervene with foreign exchange rates to gain competitiveness in trade, its central bank chief said on Monday, amid rising concerns that the country may become the first in Southeast Asia to be placed under trade scrutiny by the U.S.
In an interview with the Nikkei Asian Review, Bank of Thailand Governor Veerathai Santiprabhob stressed that the Thai baht had been moving in line with market supply and demand, pointing out that the currency had been strengthening in the past year or so to become one of the best-performing currencies in the region due to capital inflows from advanced economies.
“We have no policies of fixing exchange rates at a particular level or manipulating exchange rate to a particular level,” he said.
With a huge current account surplus accounting for 10.8% of its gross domestic product in 2017 and a trade surplus with the U.S. topping $20 billion, Thailand has already filled two of the three criteria that the U.S. Treasury uses to designate a trade partner a currency manipulator.
In the U.S. Treasury’s latest report earlier this month, Thailand was not put on its watchlist due to its small trade volumes, but it has hinted it will expand the list of countries under scrutiny in its next report expected in October.
Veerathai explained that the large current account surplus was due to three factors: cheaper oil imports; a boom in tourism thanks to a huge influx of Chinese travelers; and weak domestic investment.
But as domestic investment is picking up and oil prices are rebounding, Veerathai said that the “current account surplus is adjusting in the right direction,” projecting it would come down to around 8-9% of gross domestic product in 2018.
Thailand’s foreign reserves at the end of 2017 totaled $202.5 billion, a growth of nearly 20% year-on-year. The sharp rise hinted at baht-selling and dollar-buying by the Bank of Thailand.
Veerathai said that the central bank intervened only to tame sharp volatility that could have “much implication” on the country’s economic recovery. “We might have to intervene in the foreign exchange market from time to time, mainly because of the rapid or intense capital inflows,” he said. “It is not our policy to manipulate currencies for competitiveness gain in trade.” – Nikkei.Com
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