The Bank of Thailand has moved to curb the baht’s rapid retreat against the greenback as the local currency hit a nine-month low.
The central bank has sporadically taken action against the currency’s weakness by selling the US dollar to smooth out the baht’s movement after it depreciated at a faster pace, lowering foreign reserves, said Bank of Thailand governor Veerathai Santiprabhob.
He said the move is normal practice for the central bank.
The baht, which was the second-best performing currency in Asia last year, depreciated around 2% so far this year to 33.26 to the dollar, compared with an almost 7% decline in India’s rupee, a 6.5% weakness in the Philippines’ peso, a 5.8% drop in the Indonesian rupiah and almost a 5% fall in the Korean won.
Bank of Thailand data reported foreign reserves fell to US$215 billion (7.15 trillion baht) in April, $231 billion in May and $207 billion last month from $216 billion in March.
Capital outflows have been spotted in Thai shares and bonds over the past few months, accelerating recently as investors fret over the US Federal Reserve’s more hawkish stance on its monetary policy by the European Central Bank’s plan to end its bond purchase by the year-end and the tit-for-tat trade tariffs between the US and China.
Mr Veerathai said it was the central bank’s duty to manage the baht for both upward and downward movement. “We’ve prepared [built up foreign reserves] over the past two years,” he said.
The lower foreign reserves could also be attributed to other foreign currencies’ retreat against the dollar, as the Bank of Thailand typically allocates money into several major currencies for risk management and portfolio diversification purposes, he said. – Bangkok Post Business
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