Rumours that Central Bank will fix US$-THB at 36.00

Baht moves in high volatility Monday

The baht Monday moved in high volatility on rumour hat the central bank would turn back to implement the fixed baht regime at Bt36 to the greenback.

The baht opened the market at Bt34.95Bt34.98 to the US dollar before closed the market at Bt35.05Bt35.08. It was strengthened from Friday's close at Bt35.05.

There was reportedly that the central bank last Friday urged dealers at banks to adjust their foreign-exchange positions, resulting in banks buying up US dollar and causing the baht to weaken significantly on that day.

The Nation

FINANCE EXCHANGE RATE POLICY RUMOURS SWIRL
Chalongphob rules out pegging baht, says it's impossible
BANGKOK POST REPORTERS

Thailand will not change the managed float exchange rate system, said Finance Minister Chalongphob Sussangkarn. ''It is 100% impossible. There will be no drastic changes. The managed float system is the best, although it is a question how best to manage the exchange rate,'' he said.
''Countries across the region have been affected by volatile capital flows. And yet the market should understand that the authorities need to have instruments to manage volatility,'' he said.

Rumours circulated wildly in the banking community yesterday that the Bank of Thailand was considering a return to the fixed-rate basket system used prior to the 1997 economic crisis. Central bank governor Tarisa Watanagase hastily called a meeting with domestic and foreign bankers to clarify the exchange rate policy. ''The rumours are unfounded. There have been no changes,'' she said.

But the baht yesterday weakened to 35.03 to the dollar, compared to 34.7 last week, after the central bank directed dealers on Friday to reverse their current market positions to match their holdings at the beginning of the year. Authorities also tightened reporting requirements to force banks to submit daily updates of buying and selling activity, and emphasised that banks should ''cooperate'' with the central bank in guarding against baht speculation.

Ms Tarisa declined to offer details on the measures, saying only that ''some banks had been taking advantage of the system and speculating on the baht''.

Apisak Tantiworawong, chairman of the Thai Bankers Association, said the central bank indicated clearly yesterday that local financial institutions should not speculate on the currency. ''The message is that while market speculation is acceptable, it shouldn't be from the banks themselves,'' he said.

Steady export growth, weak imports and volatile capital inflows have helped push the baht to a nine-year high against the dollar. While a stronger baht reduces import costs and inflation, exporters have seen profits decline in the global market.

Local bankers said the order to readjust their currency portfolios would push the baht weaker this week as most banks would have to buy dollars. Thai banks have to adjust their positions by today and foreign banks get until tomorrow. ''The clear signal is that this is a warning shot, and that even tougher measures could follow if things don't improve,'' one foreign banker said. Dealers said the move would only offer temporary relief, as the trend still clearly pointed towards a stronger baht.

M.L. Thongmakut Thongyai, head of equities of Citicorp Securities (Thailand), said market rumours had focused on whether the central bank's Dec 18 reserve rule on foreign inflows would be scrapped. ''Market sentiment will improve if the measure is cancelled. But I think we will also see new controls, ones more directly addressing speculators,'' he said.

Bangkok Post

[ikarus]

In my opinion, BOT completely compromised itself. Why would not they look at Malaysia.
Malaysia is doing nothing to stem the appreciation of ringit and Badawi said that he welcomes ringit appreciation. In case of Thailand,where the economy is rapidly going down (along with consumer confidence), budget deficits emerging and rates going down, it is only a matter of time before baht stabilizes. Though new finance minister is clearly better than the previous
one, he already started talking about "new measures"...
Smart people getting out of Thailand as we speak and expats at least should start thinking about escape routes..
One big "boom boom" in Pattaya and you will never be able to sell your business or condo.
Those who consider to start a business in Thailand now or just moving in now, in my opinion,
are just crazy..

In my opinion, BOT completely compromised itself. Why would not they look at Malaysia.
Malaysia is doing nothing to stem the appreciation of ringit and Badawi said that he welcomes ringit appreciation. In case of Thailand,where the economy is rapidly going down (along with consumer confidence), budget deficits emerging and rates going down, it is only a matter of time before baht stabilizes. Though new finance minister is clearly better than the previous
one, he already started talking about "new measures"...
Smart people getting out of Thailand as we speak and expats at least should start thinking about escape routes..
One big "boom boom" in Pattaya and you will never be able to sell your business or condo.
Those who consider to start a business in Thailand now or just moving in now, in my opinion,
are just crazy..

Look how long it took for people to forget about the big "boom boom" in Bali: about two months. Real estate there is the only thing "boom booming" these days.

[ikarus]

BG,
in this case I agree with you. I remember my conversation with Ulf from Connect immediately
after bombings in BKK and he compared this with tsunami. Well, tsunami happens in Phuket once in 500 hundred years . If we only knew that events like BKK bombings happen with the same frequency...
I just think about Chechen-type scenario. After first Chechen war Russians basically let Checnya go (that is precisely what Southern rebels want). Almost immediately Chechnya became the epicentre of everything evil: from drug trafficking and money counterfeigting to
base for Wahabists ... Then big "boom-booms" started happening all over the Russia .
Then there was the second Chechen war full with terrible atrocities from both sides...
and only this bloody event broke the Chechen resistance...
By the way , about "Boom-boom'. I remember my New year immediately after 9/11 in Phuket with almost no farangs around. So, each time tuk-tuk drivers saw me they shouted : Tomorrow America boom-boom and laughed...
Strangely enough, we are talking now about boom-boom possibilities in Phuket coming from the same enemy...

[Brad the Impala]

BG,
...
By the way , about "Boom-boom'. I remember my New year immediately after 9/11 in Phuket with almost no farangs around. So, each time tuk-tuk drivers saw me they shouted : Tomorrow America boom-boom and laughed...
Strangely enough, we are talking now about boom-boom possibilities in Phuket coming from the same enemy...

Boom Boom 9/11 was caused by separatists from Songkhla?! Or do you just mean that anyone muslim with a grievance is "the enemy"?

[ikarus]

The same money and people are behind both events. I do not think I know.