The Bank of Thailand governor urged exporters yesterday not to panic over the rapidly rising baht by selling dollars, insisting that the sharp gains of the last week would be short-lived.
The comments came as the Thai currency reached a new 10-year high against the dollar, peaking at 33.45 to the greenback in morning trade yesterday from Monday's close of 33.82-84.
The Thai unit has appreciated by 7 percent since the beginning of this year, following a 12 percent gain last year.
"Thailand is running quite a substantial current account surplus, which translates into exporters selling the US dollar," said Thiti Tantikulanan, head of capital markets at Kasikornbank Pcl in Bangkok. "The baht was stable for almost one month at 34.50. Once it strengthened past that we saw exporters coming back in to sell dollars."
Central bank governor Tarisa Watanagase said rising purchases of stocks by overseas investors have helped strengthen the baht, though the investments may slow as share prices are already high.
Thailand benchmark SET Index of equities traded near the highest since January 1997 this week. Overseas investors purchased 20.3 billion baht (US$602 million) more in Thai stocks than they sold last week, the most since the week ended April 7 last year.
Tarisa also said the baht's latest rise has been in line with gains of other regional currencies.
"Exporters should not panic because the baht rose on strong inflows into the stock market. The massive selling of dollars will help push the baht to appreciate further," Tarisa said in an interview with a Thai radio station.
She said the dollar would weaken as imports as well as capital outflows are expected to rise substantially, which would then weaken the baht.
"Imports began rising in May and are expected to increase substantially in the second half of the year, which would certainly boost demand for dollars" and weaken the baht, she said.
"Rising capital outflows for both direct investments and stock or bond purchases will help weigh down the baht," she said.
Tarisa also warned investors to manage their stock portfolios cautiously, saying that skyrocketing inflows that pushed the Thai bourse to a 10-year high also increased the risk of larger market fluctuations.
Strong inflows into the stock market and massive currency buying by exporters have pushed the baht to its highest level since July 2, 1997, when the central bank floated the baht.
The currency is even stronger in offshore markets, where it was quoted at approximately 31.60-75 yesterday, despite the central bank's efforts to rein it in.
The rising baht has drawn complaints from exporters who fear that the exchange rate is making Thai products too expensive overseas.
Exports, the key driver of the Thai economy, have remained robust despite the strength of the baht, but the central bank has previously warned of a slump in export growth due to a possible slowdown in the global economy.
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