January 24th, 2008, 15:08
Whither the baht - Bangkok Post
By Parista Yuthamanop
"It is now all about risks and rewards: The new government will have to consider whether to keep its promise to scrap the currency controls, because if it is left unfettered, the currency is certain to appreciate this year.
One of the more tricky policy conundrums which will face the new government will be what to do with the baht. Pundits agree that left unfettered, the currency is certain to appreciate this year, given the likelihood of a US economic recession and a continued trade surplus for Thailand.
Market intervention remains one option to help preserve stability in exchange rates. More controversial will be the policy stance towards the existing capital controls on foreign inflows.
The People Power party, in its election campaigning last year, pledged to remove the 30% reserve rule on inflows as part of a programme aimed at reviving foreign investment and sentiment. But the discussions between the new finance minister and the Bank of Thailand will not be about whether capital controls are worth the cost, but rather what other options remain to safeguard the currency in the face of an increasingly unstable global market.
The reserve rule, first announced on Dec 18, 2006, initially required foreign investors to set aside 30% of their inflows as an unremunerated reserve with the central bank, and was structured as a penalty against short-term ''hot'' inflows.
But the policy has attracted considerable criticism from investors, who are typically wary of any obstacles impeding their ability to bring in _ and take out _ capital......"
Full article http://www.bangkokpost.net/topstories/t ... ?id=125405 (http://www.bangkokpost.net/topstories/topstories.php?id=125405)
By Parista Yuthamanop
"It is now all about risks and rewards: The new government will have to consider whether to keep its promise to scrap the currency controls, because if it is left unfettered, the currency is certain to appreciate this year.
One of the more tricky policy conundrums which will face the new government will be what to do with the baht. Pundits agree that left unfettered, the currency is certain to appreciate this year, given the likelihood of a US economic recession and a continued trade surplus for Thailand.
Market intervention remains one option to help preserve stability in exchange rates. More controversial will be the policy stance towards the existing capital controls on foreign inflows.
The People Power party, in its election campaigning last year, pledged to remove the 30% reserve rule on inflows as part of a programme aimed at reviving foreign investment and sentiment. But the discussions between the new finance minister and the Bank of Thailand will not be about whether capital controls are worth the cost, but rather what other options remain to safeguard the currency in the face of an increasingly unstable global market.
The reserve rule, first announced on Dec 18, 2006, initially required foreign investors to set aside 30% of their inflows as an unremunerated reserve with the central bank, and was structured as a penalty against short-term ''hot'' inflows.
But the policy has attracted considerable criticism from investors, who are typically wary of any obstacles impeding their ability to bring in _ and take out _ capital......"
Full article http://www.bangkokpost.net/topstories/t ... ?id=125405 (http://www.bangkokpost.net/topstories/topstories.php?id=125405)