Bank of Thailand Eases Rules to Temper Currency

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The Bank of Thailand eased some foreign-exchange rules as part of a previously announced plan to temper the baht.

The threshold for proceeds that do not need to be repatriated rises to $1 million from the current $200,000, effective March 2, the central bank said in a statement Friday, adding that the “relaxation includes not only export proceeds but also other income as well.”

Exporters with proceeds equal to or above the new threshold can use them to offset foreign-currency expenses, without having to repatriate the funds, the central bank said. It added that these steps will help firms cut fund transfer costs and manage foreign-exchange risk, while also promoting balance in capital flows and reducing pressure on the baht.

Baht strength last year hurt Thailand’s economy -- which relies on exports and tourism -- and officials struggled to restrain the appreciation. The picture in 2020 is very different, with the currency weakening about 5% against the dollar due to the coronavirus outbreak. That’s made it the weakest over the period in an Asian basket tracked by Bloomberg.

“In terms of sentiment, I don’t think the timing is right,” said Jitipol Puksamatanan, the head of markets strategy at SCB Securities Co. in Bangkok. “Because right now, the exports sector is facing the coronavirus crisis and may not hold any cash in foreign currency.”

‘Small Impact’

He added that the relaxation would have a “very small impact” as most large companies have treasury centers for currency management.

Bank of Thailand Governor Veerathai Santiprabhob said in a January interview -- before the virus crisis flared -- that the central bank would take further steps to ease restrictions on capital outflows in an effort to curb gains in the baht.

Aside from raising the repatriation threshold, he also flagged two other steps:

  • In the first half of the year, liberalize the foreign-currency deposit account framework so individuals and local companies can keep foreign currency in Thailand
  • Relax rules so insurance companies can invest abroad more easily

The monetary policy committee earlier this month said it remained concerned “the baht might not be consistent with economic fundamentals” and encouraged the central bank to consider additional measures to spur capital outflows.

©2020 Bloomberg L.P.

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