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.¬

Source:¬ https://www.bangkokpost.com/business/finance/1679168/bot-prepares-for-us-manipulation-listing