Currency War could find its way to emerging markets.

Euro – Baht – Finanzen.net

Govt prepared to cope with funds inflows from euro-zone …

The Nation

January 24, 2015

bathThe Thai government is moving to brace for an influx of funds from the Europe Union’s bigger-than-expected bond purchasing programme, fearing this might strengthen the baht and affect Thai export growth this year.Prime Minister General Prayut Chan-o-cha has asked the Finance Ministry and the Bank of Thailand to prepare measures for possible impact from the euro zone’squantitative easing (QE) programme, during a meeting yesterday. The European Central Bank (ECB) on Thursday said it would buy 60 billion euros (US$ 69 billion) in private and public sector bonds per month from March until the end of September next year. The amount is above market expectation of no more than 50 billion euros…

The baht has appreciated from Bt32.97 per US dollar on January 5 to Bt32.60 yesterday while the country’s policy interest rate is currently at 2 per cent. Wall Street jumped 1.5 per cent and European shares climbed to a seven-year high on Thursday. All Asian markets went up yesterday after the ECB launched a landmark bond-buying stimulus programme that buoyed investors‘ risk appetite, drove bonds higher and kept the euro pinned to near 11-year lows. Fiscal Policy Office director-general Kritsada Jinavijarana said the fiscal measures, including assistance to Thai exporters and cost reduction for business operators, had been taken. „Tax cuts for small and medium-sized enterprises, tax reduction on raw materials and machinery, and nano-finance are also included,“ he said. He said there might be some BOT monetary measures, particularly when the baht is affected by capital movement.

The situation could bring about a currency war in several countries. „The extent of the impact on Thailand will depend on the amount of capital flowing into the country. QE of 60 billion euros monthly is big enough to affect the Thai currency,“ said Kritsada. Finance Minister Sommai Phasee said the euro zone’s aggressive QE policy could lead to appreciation of the baht due to increase in global liquidity, which could find its way to emerging and promising markets, including Thailand. This situation could lead to lower exports. However, he said the BOT has a choice to use its international reserves as well as reduce the policy rate to take care of the situation since the situation can have a negative impact on the real sector. Meanwhile, BOT spokesman Chirathep Senivongs na Ayudhya said „there was no irregularity in the baht situation“ yesterday. „The BOT, however, will keep a close eye on the global funds flow and its impact on the baht in the coming period,“ he added. CIMB Thai Bank’s head of research centre Amonthep Chawla said that even though the bond buying would be in Europe, the high liquidity would bring capital inflows to Asia and emerging markets, including Thailand.

 

Urgent meet sought on baht

The Nation

January 21, 2015

By Petchanet Pratruangkrai

In the wake of global currency volatility, the Board of Trade of Thailand and the Thai Chamber of Commerce will soon call for a meeting with the Bank of Thailand to discuss currency risk and hear the bank’s views on how to balance the rate of the baht to ensure benefits for exports, imports and investment.

Isara Vongkusolkit, chairman of the two private-sector bodies, yesterday said exchange-rate volatility around the world – and the weakening of the euro and the movement of competitors‘ currencies, in particular – had created huge concern in the business sector, especially among exporters. „Comparing the baht with other currencies, and particularly rival exporting nations, the unit has depreciated slightly, while others have been weakening significantly.

This has impacted Thai export competitiveness. Global currencies in many countries, and the Russian ruble and the European Union’s euro in particular, could continue to weaken and affect Thai trade significantly in the future, said Isara. However, he declined to comment on what is an appropriate rate for the baht as far as exporters are concerned, saying that the authorities need to closely monitor not only exports, but also imports and investment, as this year the government plans to start many infrastructure investment projects. He said private enterprises wanted to hear what the central bank had to say about its strategies and measures for dealing with the prevailing volatility in the currency markets. The private sector also wants the authorities to balance benefits for the real sector in terms of exports, imports and investment, he added.

According to a report by the chamber, the baht weakened 0.49 per cent over the course of last year…However, some of Thailand’s key export rivals saw much larger depreciations in the same period, such as the Malaysian ringgit, at 6.28 per cent, the Singaporean dollar, at 4.41 per cent, the Indonesian rupiah, at 2.22 per cent, and the yen, which fell 11.86 per cent against the greenback during the year…

The Commerce Ministry has forecast that the top 18 products exported from Thailand to the EU will face a combined loss of US$ 86.88 million (Bt2.84 billion) this year from the higher tariff rates in the absence of the GSP privilege. Products that will be largely impacted are shrimp, as the tariff rate has been increased from zero to 7-20 per cent, while for automobiles the hike is from 0-15.4 per cent to 3.5-22 per cent, and for rubber tyres from zero to 4.5 per cent. In addition, Isara said goods prices could be reduced in the near future following the fall in the price of oil, although businesses may need time to clear their stocks first.

 

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