whosyourdaddy Posted June 22, 2005 Report Share Posted June 22, 2005 http://www.nationmultimedia.com/2005/06/22/business/index.php?news=business_17788886.html BAHT SPECULATION: Ghosts of ?97 put BOT on alert Published on June 22, 2005 The Bank of Thailand (BOT) said yesterday that it was keeping a close eye on the value of the baht because of similarities between the current spate of baht speculation and that which hit the currency before the 1997 crisis. Nitaya Pibulratagit, central bank assistant governor, said concerns over Thailand?s current-account deficit had prompted speculation in the baht. As happened in 1997, traders are betting the baht will weaken against the greenback due to an external-stability problem. In practice, non-residents borrow baht, prompting the baht rate in offshore markets to rise. They then use the baht to buy US dollars, before selling the dollars at a profit once the baht weakens against the dollar as expected. The lending rate in offshore markets, called ?tom-next? (borrow tomorrow and repay the next day), rose as high as 14.12 per cent on Monday while the one-week lending rate was quoted at 8.19 per cent. The tom-next rate dropped to 7.93 per cent at 9pm yesterday, while the one-week rate was 8.45 per cent. The central bank recently introduced an anti-speculation measure aimed at financial institutions, which are now prohibited from borrowing more than Bt50 million from non-residents for a period shorter than three months. Such borrowing will be allowed only if the loans are for genuine underlying transactions such as trade transactions. Despite the rule, Nitaya said the speculation was continuing. She said some non-residents were lending less than Bt50 million in short-term baht credit to financial institutions without underlying transactions. The baht on the Asian spot market was quoted at Bt41.16 in the morning session yesterday, 1.79-per-cent weaker than it was at the end of last month. The unit closed at Bt41.21 per dollar at the end of Asian trading. Earlier, central bank governor MR Pridiyathorn Devakula said the bank had ?overseen? the baht over the past few weeks as it was too weak against the dollar compared to Thailand?s competitors. He said the move was aimed at helping Thai exporters remain price-competitive. Thailand had US$48.3 billion (Bt2 trillion) in international reserves on June 10, compared to $48.7 billion two weeks earlier. The reduction was due partly to the revaluation of the dollar, which has strengthened, and the central bank?s defence of the baht. The baht defence has resulted in less baht liquidity in the financial system.To neutralise the system, the central bank had to inject baht into it by buying dollars and selling baht in the swap market. This resulted in the level of forward obligations falling to $4.7 billion as of June 10, down from $6 billion two weeks earlier. In 1996, Thailand?s current account deficit blew out to as much as $14.3 billion, or 7.9 per cent of gross-domestic product. Foreign investors then starting drawing their funds out of the Kingdom due to concerns about the country?s economic stability. The capital outflow put pressure on the Thai foreign-exchange rate. Attacks on the baht increased significantly in January 1997 and continued until May that year. Thailand was forced to float two months later. Anoma Srisukkasem The Nation Link to comment Share on other sites More sharing options...
Flashermac Posted June 25, 2005 Report Share Posted June 25, 2005 Just try and get your money out of Thailand nowadays ... Link to comment Share on other sites More sharing options...
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