Thailand’s baht concern
Currency hits 17-month high, minister says rate ‘not at a good level’
BANGKOK: Thailand joined a growing chorus of developing nations expressing alarm at the rapid appreciation of their currencies as increased monetary easing in the United States and Japan spurs demand for higher-yielding assets.
The baht climbed to a 17-month high yesterday, before retreating after Finance Minister Kittiratt Na-Ranong said the exchange rate was “not at a good level” and exporters would face difficulties should it strengthen further.
The Bloomberg-JPMorgan Asia Dollar Index is headed for a record eighth monthly gain and currencies in Colombia, Poland and Romania reached their strongest levels this month since at least February 2012.
The Federal Reserve expanded its monthly asset purchases from Jan 1, boosting the supply of US currency, and Japanese Prime Minister Shinzo Abe is seeking “bold” monetary easing to end deflation.
Russia’s central bank warned on Wednesday the world is on the brink of a fresh “currency war,” while policymakers in South Korea and the Philippines said this week they might restrict capital inflows.
Colombia’s finance chief called on his central bank to step up US dollar purchases and the Czech Republic threatened intervention to weaken the koruna.
“With risk appetite among investors growing this year and plenty of liquidity supplied by developed nations, appreciation pressure on the emerging-market currencies is unavoidable,” said Koji Fukaya, a former chief foreign-exchange strategist at Credit Suisse Group AG in Tokyo who now runs his own consultancy, called Office Fukaya.
“Monetary authorities are probably not trying to guide weaker currencies, but the problem for them is the pace of their appreciation.”
The Asia Dollar Index, which tracks Asia’s 10 most-used currencies excluding the yen, has risen 0.4% this year and the Bloomberg- JP Morgan Latin America Dollar Index is up 0.7%.
Romania’s leu climbed 3.2%, Mexico’s peso 3.1% and the baht 2.5%, leading gains among 25 emerging-market currencies tracked by Bloomberg.
Romanian central bank Deputy Governor Cristian Popa said on Wednesday the currency was “not distant from fair value,” while Russia’s central bank has already intervened this year to stem gains in the ruble.
Colombia’s peso strengthened 1.2% in the past month and Finance Minister Mauricio Cardenas said on Tuesday he saw no reason for such gains and would like to see the central bank boost US dollar purchases after it bought a record US$4. 8bil in 2012.
The yen weakened 0.3% yesterday as Japanese Economy Minister Akira Amari said the yen was still in the process of correcting from excessive gains.
The currency touched 89.67 on Jan 14, the weakest level since June 2010. — Bloomberg