Thai Central Bank Relaxes Currency Rules to Help Businesses

(Bloomberg) -- The Bank of Thailand said it’s easing some foreign-exchange rules to reduce compliance costs for the private sector. The baht strengthened as speculation the monetary authority might unveil major steps to curb the currency’s appreciation proved unfounded.

The central bank in a statement Monday laid out a time-line for regulatory changes that seek to improve clarity and eliminate redundancy. The steps will save businesses more than 1 billion baht annually ($29 million), and some changes will come into effect as early as this month, Governor Veerathai Santiprabhob said in a briefing in Bangkok. The measures are unrelated to reducing foreign-exchange risks, he later told reporters.

Key Points:

  • Stock brokerages will be allowed to buy and sell foreign exchange for locals and non-residents
  • Commercial banks can give baht loans to non-resident companies investing in Thailand without needing central bank approval
  • Commercial banks can give baht loans to companies registered in the Greater Mekong subregion for infrastructure and industrial investment projects that also benefit Thailand
  • Money changers will be allowed to sell foreign currency banknotes to offshore banks and money changers
  • Easier rules and documentation requirements for outward remittances of $50,000 or above for eligible purposes
  • Retail investors with assets of over 50 million baht but below 100 million baht will be able to invest directly in overseas securities up to a gross flow of $1 million annually
  • Greater flexibility is planned for foreign-exchange risk management

The central bank has signaled concern about the strength of the baht, and Veerathai on Monday reiterated the stance that the monetary authority is monitoring the situation and ready to act when necessary. He has previously rebuffed claims that export-reliant Thailand manipulates the exchange rate to gain an advantage in trade.

The baht appreciated 0.1 percent to 34.008 per dollar as of 4:08 p.m. in Bangkok, after rising as much as 0.3 percent following the start of the central bank’s briefing on easing rules. 

"Given recent concerns by the Bank of Thailand about the strong baht, people in the market were expecting it to do something to control inflows," said Anchali Singh, an analyst at Kasikornbank Pcl in Bangkok. "But the measures we were seeing do nothing of that sort, and they are mainly aiming to improve business and help people to invest abroad."

Thai Central Bank Relaxes Currency Rules to Help Businesses

The baht has climbed about 4.8 percent against the dollar in the past year, the third-best performer in a basket of Asian currencies tracked by Bloomberg. Overseas investors bought a net $8.3 billion of Thai bonds and $1.9 billion of stocks in the period. The central bank has reduced issuance of short-term bonds in recent weeks to deter inflows.

A prolonged current-account surplus has bolstered the allure of the currency, while foreign-exchange reserves are close to a record. Thailand should maintain flexibility in the baht and limit intervention to avoiding disorderly market conditions, the International Monetary Fund said on Thursday.

The Bank of Thailand has previously taken steps to ease rules on capital flows, such as allowing direct purchases of overseas equities and derivatives by qualified investors, as part of a push to bolster the country’s financial development.