Thai central bank chief tell exporters not to panic over strengthening of baht

Thai central bank chief tell exporters not to panic over strengthening of baht

	Published : Tue, 10 Jul 2007 06:55 By : Agencies Print this Story

BANGKOK (Thomson Financial) - The governor of the Bank of Thailand, Tarisa Watanagase, urged exporters Tuesday not to panic over the rapid strengthening in the baht by selling US dollars, insisting that the Thai currency's sharp gains over the last week would be short-lived.

Tarisa was speaking as the dollar reached a new 10-year low against the Thai currency, dropping to 33.45 baht in morning trading here from Monday's close of 33.82-33.84 baht.

The baht has appreciated by seven percent since the beginning of 2007, having strengthened by 12 percent in 2006.

Tarisa Watanagase said the baht's latest rise had been in line with gains in other East Asian currencies.

'Exporters should not panic, because the baht rose on strong inflows into the stock market. The massive selling of dollars will help push the baht to appreciate further,' Tarisa said in an interview broadcast by a Thai radio station.

She said the dollar would weaken because imports and capital outflows were expected to rise substantially, which would then weaken the baht.

'Imports began rising in May and are expected to increase substantially in the second half of the year, which would certainly boost demand for dollars,' she said.

'Rising capital outflows for both direct investments and stock or bond purchases will help weigh down the baht.'

Tarisa also warned investors to manage their stock portfolios cautiously, saying that skyrocketing inflows that have pushed prices at the Thai stockmarket to 10-year highs had also increased the risk of bigger fluctuations in the market.

Strong inflows into the stock market and massive buying of baht by exporters have pushed the currency to its highest level since July 2, 1997, when the central bank floated it.

The baht is even stronger in markets abroad, where it was quoted at around 31.60-31.75 Tuesday, despite the central bank's efforts to rein in its appreciation.

The rise in the baht has drawn complaints from exporters, who fear that the exchange rate is making Thai products too expensive abroad.

Exports, the key driver of the Thai economy, have remained robust despite the strength of the baht, but the central bank has already warned of a slump in export growth due to the possibility of a slowdown in the global economy.

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