Thailand: BoT prepares for US manipulation listing
Bank of Thailand governor Veerathai Santiprabhob has acknowledged the possibility that the US will add Thailand to a watch list for currency manipulation because of a high current account surplus, but not for stepping into the foreign exchange market for trade advantages.
Thailand has no policy of currency intervention to gain a trade advantage, he said, adding that the firmer baht has been driven by external factors, especially the US-China trade dispute.
“Don’t panic if Thailand is added to the US watch list,” Mr Veerathai said. “It will not affect the economy or our policy implementation.”
The baht’s rapid gain against the US dollar shows that the central bank does not manage the currency for competitive advantage in trade, he said.
The local currency is Asia’s best-performing currency this year, rising more than 3% against the greenback.
The baht reversed the trend after US-China trade tensions flared up. Sentiment last month was dented by concerns over local political stability after March’s election outcome added to the possibility of a new coalition government with a razor-thin majority.
Bloomberg reported that the US Treasury examined its 12 largest trade partners and Switzerland and that the expanded watch list could include Russia, Thailand, Indonesia, Vietnam, Ireland and Malaysia, all of which have large trade surpluses with the US.
The Treasury issues a report twice annually on foreign currencies. In the latest report, expected this month, the number of countries whose currency practices the US examines for possible manipulation will rise to about 20 from 12, people familiar with the matter told Bloomberg.
The number increased after the Treasury altered one of the three criteria it uses to test for manipulations, according to Bloomberg.
That criterion is current account surplus, which captures the difference between the amount a country exports and imports. The criteria was reduced to a surplus of 2% of GDP from 3%, Bloomberg reported.
The other two criteria are trading partners with a trade surplus of $20 billion or more with the US and those with persistent one-sided intervention in the foreign exchange market with net purchase of at least 2% of GDP.
Thailand’s trade surplus with the US stood at copy2.9 billion last year, while its current account surplus represented 7.4% of GDP.
Mr Veerathai said the central bank has continuously discussed the issue with the US Treasury in recent years.
The Bank of Thailand will continue to monitor the baht to reduce volatility when large offshore funds flow into the country, he said.
Regarding wild swings in foreign exchange, he urged business operators to hedge against currency risk.