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Published on February 29, 2008

Treasurers predict the baht's strength will continue if exporters still sell off dollar revenue as quickly as they have so far.

The baht opened at 32.05/32.08 to the dollar before reaching a peak of 31.98 in the morning. It closed at 32.00/32.01, up 0.33 per cent from Wednesday.

The treasurers said exporters continued to sell off their dollar income amid fears the government will remove the withholding-reserve requirement.

Moreover, they sold off their yen and euro revenue after those currencies turned much stronger against the dollar.

Bank of Thailand (BOT) Governor Tarisa Watanagase late on Wednesday said the appreciating baht was also a result of concerns over the revocation of capital controls.

"Not only the baht, but also other regional currencies have reached a new high several times," she said.

Tarisa said the baht level should not be considered on a day-to-day basis, but rather over the long term. The baht has been largely stronger in the short term.

So far this year, the baht has strengthened 5.25 per cent, the highest rate after the yen at 6.24 per cent. It was strongest in the region at 12.67 per cent from the end of 2006.

The governor insisted the central bank would not remove the withholding-reserve requirement at this moment and welcomed opinions from outsiders.

"But the central bank will do anything for the country's benefit," said Tarisa.

The governor declined to comment on the fixed-exchange-rate policy earlier suggested by Prime Minister Samak Sundaravej, who said the BOT should study the fixed-rate regime currently adopted by some countries, including Malaysia, Japan and China.

Meanwhile, Finance Minister Surapong Suebwonglee yesterday attributed the baht's recent strength to the globally weak dollar.

"I'm confident the central bank is closely monitoring the dollar-baht movement," Surapong told reporters.

The baht is unlikely to be affected by Wednesday's decision by the Monetary Policy Committee to leave the policy rate unchanged at 3.25 per cent, said Surapong.

US Federal Reserve chairman Ben Bernanke on Wednesday told Congress weak US economic growth might prompt the Fed to cut interest rates further, to ward off a severe downturn.

Bernanke said "downside risks" to growth were buffeting the US economy and stressed that despite heightened inflation worries, the Fed was ready to implement fresh rate cuts if economic momentum was threatened.

"The FOMC [Federal Open Market Committee] will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said.

Surapong said the central bank had submitted the information he requested on the country's capital controls.

He said a decision on whether to remove the controversial controls on short-term capital inflows would be made before his visit to Japan, but he did not provide a specific time frame.

Surapong on Wednesday said once he received the requested information from the central bank, the decision could be made within a matter of weeks, not months.

Surapong previously said the capital-control issue would be resolved before the government started its policy roadshows, slated for next month or April.

Anoma Srisukkasem

The Nation, Agencies