Mixed reaction to baht value after two years float.
The currency closed Friday at 37.10 baht to the dollar, up from its low of around 56 baht in early 1998. When Thailand let the baht float July 2, 1997, unleashing the economic turmoil that was to sweep the region, it traded at about 25 to the dollar.
Deputy Prime Minister and Commerce Minister Supachai Panichpakdi echoed the concerns of exporters recently when he said the baht is a bit strong compared to competitors' currencies, particularly in Asia.
Supachai said the baht needed to lose ground again if Thailand was to see the 4% growth in exports targeted for this year. The devaluation had helped Thailand record surpluses in its trade and current account after years of deficits before 1997.
But Finance Minister Tarrin Nimmanahaeminda has said the baht's current value reflects market mechanisms and that the government has no reason to intervene in currency markets.
The strong baht will benefit the debt-ridden private sector, which had to settle a total of 52.9 billion dollars in external debt as of February this year.
An economist at the Bank of Thailand, the central bank, said monetary authorities' main concern is stability.
"We cannot judge if it is too strong or weak. But we make sure there are never extreme swings," said Atchana Waikuamdee, director of the Economic Research Department at the bank.
The baht averaged 37.02 to the dollar in May, appreciating from 37.6 baht in April.
This was partly due to an international credit rating agency revising its outlook on Thailand's credit rating from stable to positive, resulting in the inflow of funds for portfolio investment, the bank said.
A private research house owned by Thailand's third biggest bank, Thai Farmer Bank, said the baht would remain strong and stable amid continuing current account surpluses and positive signs of export growth.
But the research center said the baht is vulnerable to external factors, such as a Chinese devaluation of the yuan.
Most observers fear Beijing will devalue to cope with a sharp fall in exports projected at 5% this year, the center said. However, economists were still optimistic about prospects for the baht. They do not expect any repeat of the 1997 attack on the currency due to the positive export trend and confidence among foreign investors in Thailand's economic management. "Despite the pain, floating the currency is the right policy since it makes our currency flexible to economic reality," said Anusorn Jamajai, assistant vice president of Citibank (Thailand).
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|Publication:||Asian Economic News|
|Date:||Jul 5, 1999|
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