Baht too strong? 1US$ = 37.16 yesterday

Baht too strong: Tarisa

The Bank of Thailand yesterday warned the baht was "too strong" after the currency appreciated to 37.08 to the US dollar - its highest level six years and 10 months - due mainly to capital inflows.

Dealers predict the baht will even grow stronger by year's end, to 36.50 to the dollar. The baht opened yesterday at 37.16/37.18 against the dollar before shooting up to 37.08 during the day's trading. It closed at 37.11/37.14.

BOT Governor Tarisa Watanagase said the baht had strengthened too much against the dollar, due to strong foreign inflows.

But she declined to comment on whether the central bank would intervene to curb the rise.

Songpol Chevapanyaroj, head of Kasikornbank's capital-market operations, said yesterday that the baht appreciation was due mainly to capital inflows into Asia, including Thailand. He said investors shifted away from the dollar, which is weakening due to fears that the US central bank will keep its signal rate unchanged at its next meeting.

He predicted the baht would hover between 37 and 37.30 to the dollar over the next two weeks.

Phatra Securities managing director Supavud Saicheua also sees the possibility that the baht will further strengthen to 37 to the dollar, on the back of continued capital inflows to the region.

"At that level, it's not too strong compared with the strength of regional currencies," he noted.

However, he expressed concern that a strong baht could encourage local manufacturers to import raw materials, which could widen trade deficits and eventually weaken the exchange rate. - Somruedi Banchongduang, The Nation.

It's not that the baht is too strong, but rather that the US$ is weakening, and will fall further as the trade deficit increases.

I for one would definitely prefer the baht to be a whole lot weaker...

bobcan - I am not sure how you come to the conclusion that it's only the UD dollar falling? The baht has risen against the UK Pound and the Euro.

http://finance.yahoo.com/currency/conve ... it=Convert (http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=THB&submit=Convert) is a place where you can view graphs of currency movements.

I did not say that it is only the US$ that is falling. Other currencies are weakening too.
Living in Canada, we have experienced in relation to the US$, a rise from 62 cents to about 88cents in a little over a year. Some of this rise is due to our rising oil exports, but as most financial commentators have pointed out, the rise in the Canadian $ is mostly due to the falling value of the US$, as its trade deficit and balance of payments continues to worsen.

When the Canadian $ strengthens against the US$, it also gains against the Thai Baht. I used to get only 25 Baht to the Canadian $, now I get over 33 Baht.

As for the European currencies, they have their own problems.

BoT boosts measures to curb strong baht

The Bank of Thailand (BoT) Friday stepped up measure to curb the baht's appreciation, intervening in the foreign exchange market and expressing an intention to ease regulation of foreign investment by local entities.

The comments were the first public admission of intervention in the baht by Tarisa, who was appointed by Cabinet last week to the post and awaits official endorsement of the appointment by His Majesty the King.

Acting central bank governor Tarisa Watanagase said Friday that the central bank bought the dollar to lift the currency from its seven-year low against the baht as the U.S. unit had fallen too far too fast. "The baht got very strong because of a lot of capital inflows. We had to take some action to prevent excessive baht's volatility," Tarisa told reporters.

Tarisa said foreign funds bought Thai shares aggressively after the U.S. Fed decided earlier in the week to keep its benchmark rate steady.

The Nation