MNI INSIGHT: Thai Central Bank Unfazed By Baht Strength

The Bank of Thailand is happy with the Thai baht at current levels but also accepts there is little it could do to weaken the currency even if it wanted to, MNI understands.

Underpinned by strong capital inflows, the THB has closed in on eight-year highs around 30 to the U.S., down from as high as 33 in April 2020, and beyond the 32 level that the central bank sees as optimal for exporters. MNI understands the central bank also sees an upside in a strong baht, advocating for Thai businesses to use it as an opportunity to ramp up investment and expenditure on capital goods.

OPTIONS

The BoT cut its policy rate by 75 basis points over 2020 to a record low of 0.5%. But even though the economy is not rebounding as rapidly as expected there appears little current inclination for a full-blown programme of government bond-buying and the Governor recently said it was not appropriate for current Thai conditions, although the markets operations department stands ready to buy bonds to stabilise the market as it did in March.

Alongside its programme to purchase corporate bonds, the bank is likely to seek fresh unconventional policy measures, such as providing a potential asset warehouse allowing commercial banks' to 'freeze' non-performing assets from the hard-hit tourism sector.

CORPORATE BONDS

The bank will also look to fully utilize its USD12 billion corporate bond stabilisation fund, established last year, to mitigate a blowout in problem corporate debts.

These measures will complement fiscal stimulus after the government announced USD7 billion in cash handouts to Thai consumers in January.

The BOT recently revised down its estimate for 2021 GDP growth to 3.2% from 3.6%, and MNI understands that a resurgence in virus infections could trigger another downgrade, as hinted at by Governor Sethaput Suthiwartnarueput in a recent media interview