The Thai central bank does not intervene with the baht in order to gain a trade advantage, the Bank of Thailand (BOT) said on Thursday.
BOT’s comments came after UBS Group said on Wednesday that Thailand and Taiwan could be added to the US’ watch list for currency manipulation.
Three Southeast Asian countries, including Singapore, Malaysia and Vietnam are already on the list and have been since May 2019.
The Swiss investment bank said that Thailand now meets all three of the US Treasury Department’s criteria. This includes:
- A trade surplus of at least US$20 billion
- A current-account surplus of at least two per cent of the GDP
- A persistent and one-sided intervention in the currency equivalent to two per cent of the GDP in the past 12 months
Chantavarn Sucharitakul, the BOT’s Assistant Governor of Communications and Corporate Relations Group, said the Thai central bank has been in constant contact with the US Treasury in regards to capital flow in the global market and the development of Thailand’s trade surplus with the US.
She said the BOT discussed its need to “mitigate” to maintain the stability of the baht in a period of sudden capital inflow due to the changing investor perspective on the global market and major industrial countries.
“The BOT has always insisted that its activity in the foreign exchange market are not aimed to manipulate the currency to gain an advantage on Thai trading partners,” she said.
She added that the baht has been moving in two directions, both depreciating and strengthening, and not only in one direction.
The BOT’s activities include both buying and selling foreign currencies on the foreign exchange markets based on the amount of capital flow that is moving in and out very quickly.
UBS Group said Thailand has already surpassed the $20 billion mark and that the BOT was estimated to have intervened in 2019 in the currency market for ten months out of the year.
According to the US Census Bureau data, Thailand’s trade surplus with the US exceeded the $20 billion mark since November. Its current account surplus also exceeds 2 per cent of the GDP, at 5.3 per cent in 2019.
But the Thai baht gained over 9 per cent against the US dollar in 2019, the most in Asia, before dropping down from 30 baht per greenback at the beginning of 2020 to 33 baht per US dollar by April at the peak of the coronavirus outbreak in Thailand.
With in-flow from the investors’ view of Thailand’s success in controlling the outbreak, the baht picked up to 30-31 baht again during June. It was trading at 31.6 on Thursday morning.
Tim Leelahaphan, a Thailand economist at Standard Chartered Bank, told Thai Enquirer that the bank expects the baht to trade around 31 baht per US dollar at the end of 2020 as the economy begins to recover from the reopening of businesses.
However, the possibility of a second wave of the outbreak in Thailand, political instability, and the escalation of the US trade war with China could change that perspective.
[Photo Courtesy of the Bank of Thailand]
