Thai central bank intervenes in currency market after baht hits 10-year high
The Bank of Thailand intervened in the currency market Tuesday to restrain the rise of the baht after it touched a 10-year high, Gov. Tarisa Watanagase said.

The baht closed Tuesday at 33.48 to the dollar, just off an early high of 33.47, its highest level since September 1997. The baht had closed at 33.78 Monday.

Tarisa said the baht’s recent strength has been due mostly to portfolio investments, but its rise Tuesday was due to misunderstandings about new rules allowing certain nonresidents to tap onshore baht liquidity.

“The baht today was pressured by exporters’ panic selling (of dollars) which caused an abnormal move in the baht. Exporters should not panic,” Tarisa said at a briefing for reporters.

The Bank of Thailand said Monday it would create a one-month window starting July 16 for foreign businesses and banks to borrow baht within the country to roll over hedged offshore positions.

The baht trades at a higher level outside Thailand because some foreign investors want to avoid a 30 percent withholding requirement imposed in December on many types of inflows. The central bank imposed those capital controls to stem the baht’s appreciation.

So far this year, the baht has risen 7 percent against the dollar, compared with appreciation by regional peers between around 1 percent and 10 percent, Tarisa said.

Upward pressure on the baht is likely to ease because portfolio inflows can’t go on forever, and dollar buying by importers is expected to rise in the coming months, Tarisa said earlier Tuesday in a live interview on a local business news radio program.

“At a certain point where stock prices have risen enough, such flows will surely slow down,” she said.

Thailand’s stock market has risen to its highest in more than 10 years.