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Bank of Thailand Struggles to Restrain Surging Thai Baht

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BANGKOK – The Bank of Thailand is fretting over how to restrain the world-beating surge in the baht just as the U.S. keeps a watchful eye out for signs of currency manipulation.

Bank of Thailand officials intensified verbal intervention in the past week, with Senior Director Don Nakornthab saying Wednesday the “worried” monetary authority is mulling how the baht can be restrained. He also flagged the possibility of an interest-rate cut.

The baht has climbed 8.3% against the dollar in the past year, the best performer globally, according to Bloomberg-compiled data. It’s viewed as a safe haven given Thailand’s history of current-account surpluses and near-record foreign reserves.

The currency’s surge threatens to deepen this year’s sharp slowdown in the export-led economy.

“For now, verbal intervention, physical intervention and closely monitoring non-resident Thai baht accounts” are options for the central bank, but capital controls are unlikely, said Roong Sanguanruang, a market analyst at Bank of Ayudhya Pcl in Bangkok.

Intervention in the foreign-exchange market isn’t as easy as before because of growing U.S. criticism, she also said.

US Treasure Eyes Baht

Thailand was listed as a major trading partner in the Treasury Department’s semi-annual foreign-exchange report in May, signaling greater oversight of its currency policy.

The Bank of Thailand has previously rejected allegations of currency manipulation and said it doesn’t seek an unfair advantage in trade.

Don said Wednesday he didn’t know which steps to restrain the currency could be rolled out, while adding that one option may be to ask banks to be stricter on short-term transactions by non-residents.

The baht weakened 0.2% against the dollar as of 11:15 a.m. on Thursday in Bangkok.

The central bank left borrowing costs at 1.75% and cut its economic growth forecasts last month as the U.S.-China trade war dims the nation’s outlook.

Source: Bloomberg