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Talk Of Potential Intervention Brings Reprieve To Baht

THB

Spot USD/THB has eased off amid talk of potential for a BoT intervention in support of the baht. The pair last changes hands -0.045 at THB34.675, with bears looking for a deeper pullback towards May 5 low/round figure of THB34.018/34.000. Bulls need a clearance of yesterday's high of THB34.752 before taking aim at May 11, 2017 high of THB34.815.

  • BoT Asst Gov Mahasandana told reporters that the central bank "will consider stepping in to take care of the baht if needed," but doesn't deem it necessary to use policy tools at this point. Talk of intervention was already doing the rounds after a senior BoT official suggested about two weeks ago that the authorities could intervene to curb THB volatility.
    • His comments drew attention to the accelerated erosion of the BoT's FX reserves observed over the past few weeks, as the nation's stash of foreign currencies shrank to the smallest size in two years. The next update on foreign reserves is due later today.
    • The risk of interventions by Asia EM central bank has risen amid the greenback's sharp rally on a YtD basis. Some of the BoT's regional peers recently stepped in to prop up domestic currencies (RBI, HKMA) or expressed readiness to do so (BI, BoK).
  • Separately, the BoT unveiled plans to ease rules on FX services offered by non-bank companies as it continues to push for reforms of Thailand's FX ecosystem.
  • Meanwhile, China's decision to crack down on "unnecessary" overseas travel poured some cold water on hopes for a swift recovery of Thailand's tourism sector. The decision was announced after Thai FinMin warned that the tourism sector may take some time to return to normal, with China struggling to bring its outbreak of COVID-19 under control.
  • On a different front, a source told the Bangkok Post that the Finance Ministry is debating a proposal to slash the diesel excise tax by THB5/litre once the current tax reduction expires next week. The aim of the proposal is to address rising inflationary pressures.

Fig. 1: Thailand International Foreign Reserves Total ($bn)

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Spot USD/THB has eased off amid talk of potential for a BoT intervention in support of the baht. The pair last changes hands -0.045 at THB34.675, with bears looking for a deeper pullback towards May 5 low/round figure of THB34.018/34.000. Bulls need a clearance of yesterday's high of THB34.752 before taking aim at May 11, 2017 high of THB34.815.

  • BoT Asst Gov Mahasandana told reporters that the central bank "will consider stepping in to take care of the baht if needed," but doesn't deem it necessary to use policy tools at this point. Talk of intervention was already doing the rounds after a senior BoT official suggested about two weeks ago that the authorities could intervene to curb THB volatility.
    • His comments drew attention to the accelerated erosion of the BoT's FX reserves observed over the past few weeks, as the nation's stash of foreign currencies shrank to the smallest size in two years. The next update on foreign reserves is due later today.
    • The risk of interventions by Asia EM central bank has risen amid the greenback's sharp rally on a YtD basis. Some of the BoT's regional peers recently stepped in to prop up domestic currencies (RBI, HKMA) or expressed readiness to do so (BI, BoK).
  • Separately, the BoT unveiled plans to ease rules on FX services offered by non-bank companies as it continues to push for reforms of Thailand's FX ecosystem.
  • Meanwhile, China's decision to crack down on "unnecessary" overseas travel poured some cold water on hopes for a swift recovery of Thailand's tourism sector. The decision was announced after Thai FinMin warned that the tourism sector may take some time to return to normal, with China struggling to bring its outbreak of COVID-19 under control.
  • On a different front, a source told the Bangkok Post that the Finance Ministry is debating a proposal to slash the diesel excise tax by THB5/litre once the current tax reduction expires next week. The aim of the proposal is to address rising inflationary pressures.

Fig. 1: Thailand International Foreign Reserves Total ($bn)

Keep reading...Show less