Thailand cuts interest rate 2nd time in 3 months to rein in surging baht

BANGKOK: The Bank of Thailand cut its benchmark interest rate for the second time in three months and said it will ease rules on outflows to curb a surging currency.

Officials told reporters in Bangkok that the central bank is worried about the strength of the baht, which may continue to weigh on the economy.The baht extended losses, falling as much as 0.7% to 30.399 per dollar, and was at 30.327 as of 3 pm in Bangkok. Governor Veerathai Santiprabhob said the currency steps announced Wednesday would address the imbalance in capital flows to make it easier to take money out of the country.Exporters with proceeds below $200,000 per bill of lading will be allowed to keep proceeds abroad without a time limit. The previous threshold was $50,000

“We hope the rate cut and the easing of rules on capital outflows will join forces to help weaken the baht”, he told reporters.The baht’s slide “stands a greater chance of being reversed as the currency continues to have a strong backing of a large current surplus, while there are little incremental benefits for the economy” from a small adjustment in the interest rate, said Prakash Sakpal, an economist at ING Groep NV in Singapore.

“It’s hard to introduce tools that could be seen as manipulating the exchange rate and so, it’s hard to change the underlying trend,” said Masakatsu Fukaya, an emerging-market currency trader at Mizuho Bank Ltd in Tokyo.

Source: Financial Digest (financialdigest.net)

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