Thailand rules out fixing exchange rate to slow baht’s rise

BANGKOK - Thailand on Monday ruled out returning to a fixed exchange rate to stop the baht’s rise against the dollar but said the government was trying to stabilise the currency.

By (AFP)

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Published: Mon 16 Jul 2007, 5:11 PM

Last updated: Sat 4 Apr 2015, 10:20 PM

‘The current, flexible managed-float system is able to manage the risks. Many countries are using the same approach. The fixed basket system is out of date,’ Finance Minister Chalongphob Sussangkarn told reporters.

Thailand maintained a fixed exchange rate until 1997, when the currency came under speculative attack and the central bank exhausted its foreign reserves trying to defend it.

The decision to finally float the baht sparked the Asian financial crisis, sinking economies around the region.

Army-installed Prime Minister Surayud Chulanont said the government was trying to keep the baht from gaining too quickly after the currency appreciated seven percent since the begining of this year, following a 12 percent gain in 2006.

‘The government has been trying to stabilise the baht’s movement by making sure that the currency is not appreciating too fast and too high,’ he told reporters.

‘The government must look at both the positive and negative impacts of the baht’s movement,’ he said.

The baht rose further Monday, trading at 33.24-28 against the dollar, up from Friday’s close of 33.31-34, dealers said. The baht was even stronger offshore, trading at 30.05-15.

A strong currency makes Thai products more expensive overseas, while reducing the value of Thai firms’ repatriated profits. Exports make up about 60 percent of the Thai economy.

Commerce Minister Krirk-krai Jirapaet warned the baht’s strength could affect the overall economy, even though Thailand is expected to reach its export target.

‘The baht has not been stable, affecting the competitiveness of Thai exports in overseas markets. Thai companies gain less when they convert their revenue into baht, and that could eventually hurt Thai economic growth,’ Krirk-krai said after a meeting with exporters.

‘However, exports have been going well, including agricultural products such as rice. We have maintained our target for export growth of 12.5 percent this year,’ he told reporters.

Business groups are clamouring for the government to do more to weaken the baht, particularly by encouraging capital outflows.

‘The government should allow the private sector to use dollars for debt payment, while speeding up debt payments by state enterprises to encourage faster capital outflows,’ said Apisak Tantivorawong, president of the Thai Bankers’ Association.

Sathit Chanjavanakul, head of Thailand’s Board of Investment, said his group believed an appropriate exchange rate was between 35 and 37 baht to the dollar.

‘The baht keeps rising so fast and so high, hurting exporters especially in agricultural sector who cannot adjust their prices or gain price advantages on imported goods,’ he told reporters.

‘The government should impose measures to stop the baht from appreciating higher, such as encouraging overseas investment both directly and in stock markets.’



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