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The Rapid Rise of Thailand’s Baht Raising Many Concerns

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BANGKOK – Thailand’s baht’s value hit a six-year high in mid-June of 31.05 against the US dollar as rate-cut signals by the US Federal Reserve prompted an influx of offshore inflows into both high-risk and safe-haven assets.

With a 6.03% year-to-date appreciation, the baht has effectively cemented its status as Asia’s best-performing currency against the greenback in 2019.

The “blame” for the surging baht has once again been placed on the Bank of Thailand and its feeble management of foreign exchange as the currency’s value continues to edge up, much to the dismay of exporters and the tourism industry.

The Bank of Thailand has not put a huge effort into taking care of the baht, for fear of being added to the US watch list for currency manipulation, and this has led to the baht’s rapid rise, according to Jittipol Puksamatanan, chief strategist at Krungthai Bank (KTB).

The local currency’s value against the dollar could briefly depreciate soon over concerns about Thailand’s economic slowdown, according to a KTB forecast.

As the baht continues to edge up against major currencies, including the yuan, it has curbed arrivals from mainland China, with the number of visitors contracting by 3% year-on-year during the January-June period.

International arrivals coming in groups and received by members of the Association of Thai Travel Agents fell by nearly 12% to 2.3 million visitors in the first half.

The China market, which controls as much as 70% of Atta’s total clients, plunged 15% to 1.62 million visitors.

Why Thailand is Not Labeled a Currency Manipulator

In spite of earlier fears, Thailand has not been added to the US Department of Treasury’s watchlist because Thailand does not meet two of the three criteria set by Washington.

In a report written by Tananthorn Mahapornprajuck, Senior Economist at Bank of Thailand, Thailand has not been added because Thailand may meet only one criterion among the three.

Thailand’s current account surplus accounting for over 7 percent of the country’s gross domestic product (GDP) in 2018, against the limit set by the US Treasury of 2 percent.

However, Thailand’s trade surplus with the US is USD19 billion, against the limit of USD20 billion. Moreover, the amount of purchases of foreign currency does not increase from the previous year.

Countries that meet two of the three limits are placed on the watchlist. Hence, the US Department of Treasury on May 28 did not list Thailand on its watchlist.

However, the economists said Thailand should closely monitor the further development related to the listing of currency manipulators by the US Treasury Department.

The watchlist is a source of fears because countries labeled as currency manipulator may be subject to penalties or trade protectionism by the US which is suffering international trade deficits.

Kasikorn Research Center noted that in spite of Thailand’s exclusion from the list this time, since many ASEAN nations have been added to the US currency manipulation watchlist, this signals that Thailand is at risk of being closely watched in the future.

Source: Thai PBS, Bangkok Post