Thread: Urgent steps demanded against baht's appreciation

CURRENCY
Urgent steps demanded against baht's appreciation

Exporters warn govt of business shut-downs



Ten export-oriented associations yesterday threatened to cut their output or even shut down completely if the government failed to stabilise the US-dollar/baht value.

This follows the sharp appreciation in the Thai currency against the greenback, which has cut into their competitiveness against other exporting countries.

They said the government must urgently implement appropriate measures to ensure that the baht appreciation against the dollar was no greater than the relative appreciation of other currencies in the region. Yesterday, they submitted a joint request for assistance to Prime Minister Surayud Chulanont, Deputy Premier and Finance Minister MR Pridiyathorn Devakula and Bank of Thailand (BOT) Governor Tarisa Watanagase.

Thai Frozen Foods Association president Poj Aramwattananont said exporters were in serious trouble, due mainly to the baht's appreciation. Not only has the problem caused their income to drop gradually when dollar income is converted into baht, but their profit margins have also been squeezed thin from pricing pressures.

"The government must find urgent measures to solve this problem. If not, many companies will have to lay off workers, reduce production or even shut down their businesses," he said.

The 10 associations are involved in frozen foods, chicken, shrimp, fruits and vegetables, vegetable oil, textiles and garments and other sectors. They contribute a combined Bt680 billion worth of export income to the Kingdom.

The baht has continued gaining against the dollar, but it ended at an eight-year record of 36.39 on Tuesday. Yesterday, the baht opened at 36.52/36.57 to the dollar and closed at 36.48/36.53.

"It moved in the range of 7 satang during the day, which is narrower than the 10-satang range of the previous days," said a Bangkok Bank dealer. He said trading volume was thin yesterday, because investors expected the US to raise interest rates to combat inflation, which should strengthen the dollar. However, the Federal Reserve Board only showed concern about inflation and did not raise the policy rate.

On Wednesday, BOT chief Tarisa said in a speech marking her first day in office that the central bank would stabilise the exchange rate as long as the actions did not run against the tide.

Phatra Securities managing director Supavud Saicheua supported the BOT's policy of limiting intervention in foreign-exchange rates, saying such intervention could pose a future burden on the central bank, and with lower intervention, the private sector would need to adapt itself to the weaker US dollar. He also said lower interest rates should discourage capital inflows, which have pushed up the baht against the greenback.

"With base inflation at 3 per cent, the central bank has room to relax its monetary policy. Interest rates could be one percentage point above inflation," he said.

The statement by the 10 associations called for the government to stabilise the baht to an appropriate value. An appreciation of 1-2 per cent or in the range of other Asian countries would be acceptable to exporters.

The BOT was asked to relieve its monetary policies and extend the dollar holding period from seven days while decreasing currency-swap arrangements.

The statement said if the government is unable to solve the problem, it should find a substitute measure to decrease the costs of production. Last, they called for the government clearly to announce what the baht should be, in order to bolster traders' confidence.

The statement pointed out that the baht had appreciated about 12 per cent against the dollar so far this year, while most regional units had risen 3-6 per cent, with the yuan gaining only 1-2 per cent.

Thai Garment Manufacturers' Association president Dej Pathanasethpong said it was time for the government to help exporters. He said the government's unclear policy for stabilising the baht's value would only lead to the shutdown of many businesses.

Business Reporters
The Nation

source: Urgent steps demanded against baht's appreciation

hey it suits me - i've got baht to be converted to USD....

leave it alone!

this is a disaster. A number of exporters reported horrible earnings for this Q3 on SET a few days ago, some with 90% loss in profits. Q4 is going to be worse.

^ I thought the SET was hot at the moment and Thailand was doing well?

Doing too well to maintain the profits of the industrials it seems... Have to move them factories to cambodia where the folks are hungrier...

Originally Posted by Helicopter

^ I thought the SET was hot

It's hot because the market is in full speculative mode now. One stock reported terrible earnings, and it's still going up like crazy. Damn, I sold too early. It went 10% in 3 fucking days. Another reported average earnings and it crashed 11%, and now it's recovering. Players in this market overreact, mostly because they are daytraders and need to cover their loss or gains. They can't play long time. And that's why this market is very "unstable". Still neat though with killer deals. One easy stock (solid company) went 50% this year, and they paid a nice dividend.

Originally Posted by Helicopter

and Thailand was doing well?

yes and no. Next year is going to be challenging. This is when the shit starts hitting the fan. Nothing major but a nice little recession. Thai economy has been growing strong for almost 4 years now. They might have another 1 or 2 years before the next business cycle.

Tinkering with currency valuations is seldom a good idea. Pegging the Baht to the USD was partly responsible for the Baht's collapse in 1997; pegging the Baht to the dollar now, to satisfy some companies that aren't competitive in an international market, seems like a particularly bad idea.

A better idea, would be to improve the quality of your exports. People would be willing to pay a little extra, if they perceive they are purchasing quality goods.

But I don't expect that idea would appeal to the Thai business manager's mentality.

Originally Posted by Niteowl

A better idea, would be to improve the quality of your exports. People would be willing to pay a little extra, if they perceive they are purchasing quality goods.

Yep, that would be an excellent idea. But improving anything here is a challenge, even with the best intentions.