Thailand: Baht weakens to 25-month low following regional downslide--High fuel prices raise concern on economy (3 stories fromThailand on currency and energy problems)

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Thailand: Baht weakens to 25-month low following regional downslide--High fuel prices raise concern on economy

Parista Yuthamanop and Nuntawan Polkwamdee

The baht fell to a 25-month low yesterday of 42.67 to the US dollar, following the downward trend in regional currencies, currency dealers said.

The Stock Exchange of Thailand also closed at its lowest level for 23 months, shedding 4.93 points or 1.72% to stand at 282.23 points in thin turnover of 1.76 billion baht.

The baht opened at 42.20 to the dollar in morning trade but quickly fell through the resistance level of 42.30.

The currency continued to slide through the day and following a rebound in late trade, closed at 42.57, currency traders said.

Heavy speculation by foreign investment funds helped push the baht down in the afternoon, following the downward trend in regional currencies, said a currency dealer at a local bank.

The high oil prices had raised concern about the Thai economy coupled with lingering political uncertainties about the forthcoming general election, the dealer said.

Regulator's policies to keep interest rates at a low level to support recovery also discourage short-term foreign investment, the dealer said.

Several large capital stocks fell sharply with banking, finance and energy shares leading the slide.

Chetavee Chareonpitak, a Bank of Thailand assistant governor, said political uncertainty was the most important factor in the baht's fall.

Capital outflows from the stock market and the level of private sector foreign debt repayments also contributed to the depreciation of the baht, although pre-payments of the foreign debt had slowed, Mr Chettavee said.

He said the central bank's regulation which ordered exporters to sell dollar earnings within seven days after transferring money into the country had helped to shore up the currency.

The economy could tolerate the baht in a range of between 40 and 42 to the dollar, he said.

The central bank would have to keep domestic interest rates at a low level to support economic recovery and the rehabilitation of non-performing loans, despite the volatiliy in the foreign exchange market, central bank officials said. http://www.bangkokpost.net/today/210900_Business02.html

Baht's slide continues, analysts tip worse yet

THE baht has continued its five-day straight plummet, and yesterday the embattled unit reached its key support level of Bt42.54 against the greenback, on sustained dollar demand, dealers said. Increasing worry about the seemingly free-falling baht also prompted investors to sell blue-chip stocks. Yesterday the baht briefly plunged to Bt42.54 against the greenback, the lowest level seen since August 13, 1998. Yesterday's performance compared with Bt42.34 to Bt42.26 in early trade and Bt42.20 to Bt42.23 at the close of trading a day earlier.

The Stock Exchange of Thailand's index ended down 4.93 points, or 1.7 per cent, at 282.23 points, on a thin market turnover of Bt1.76 billion.

Dealers predicted the Thai currency would dip further, to Bt42.75 and then Bt43 to the US dollar, because there was little help being offered by financial authorities.

"We still see continued corporate demand for dollars, and many expect the baht to tumble further," a dealer of a large local bank said.

Prime Minister Chuan Leekpai said the declining baht could be attributed to concerted weakness in other regional units. However, the market is now testing the Bank of Thailand's firm stance of refraining from intervention to shore up the battered baht.

A number of financial authorities have lined up in recent days to calm market nervousness, saying that there were no irregularities in the dollar-to-baht movement, and hence there was no need for intervention at this time. The central bank's assistant governor, Chetthavee Charoenpitaks, yesterday said Bt41 to 42 against the US dollar remained acceptable and the market should not panic.

The baht's recent weakness can be attributed to the strength of the dollar against regional currencies coupled with political uncertainty, Chetthavee said. Foreign-debt repayment is continuing at a normal rate and should not affect the baht much, he said.

Many analysts expect the baht to stabilise late this year or early next year, after a new government is formed, but almost all anticipate volatility to Bt43 or Bt44 against the dollar until then. The central bank has said it reserves the right to intervene in the foreign-exchange market, however, and yesterday's comments, at the Bt42.50 level, were the first indication from authorities that their limit of tolerance might have been reached.

The baht and its neighbouring currencies have experienced a bout of weakness in recent days, amid worries about surging global oil prices.

The oil prices have raised concern about the possibility of South East Asian countries once again plunging into financial crisis. In Seoul, South Korean Finance and Economy Minister Jin Nyum said his country was now in talks with Japan to negotiate borrowing US$5 billion in case the currency rate underwent a drastic change.

He said the chance of a second regional financial crisis was slim, because Korea and other Asian countries had recently agreed on joint measures to counter sudden currency fluctuations. "To tackle financial uncertainty in the region, Korea, China and Japan discussed setting up a foreign-currency swapping mechanism" with the Association of South East Asian Nations (Asean), Nyum told YTN cable television.

Asean central-bank officials agreed late last month to increase to $1 billion from $200 million a two-tier currency-swap scheme supporting economies with balance-of-payments problems.

The agreement was supposed to be signed at this week's meeting of the International Monetary Fund in Prague. Analysts have expressed scepticism about the deal, saying the funds committed would be insufficient for economies to defend their currencies in the face of volatile capital flows.

Asean's six founding members, Brunei, Singapore, Indonesia, Thailand, Malaysia and the Philippines, would contribute 80 per cent of total funds. Asean's newest members, Cambodia, Laos, Burma and Vietnam would contribute the rest.

Asean officials have said bilateral pacts between the top five Asean nations and Japan, China and South Korea will be signed later this year. The Nation, Agencies

http://www.nationmultimedia.com/new/fn1.shtml

Thailand: Ministers plan to sweat to save fuel

They will travel to work by bus

At least two cabinet ministers will travel to work by bus tomorrow to participate in the Car-free Day campaign.

Banyat Bantadtan, the interior minister, and Vatana Asavahame, his deputy, will leave their comfortable cars at home and subject themselves to the hardships of the city's crowded public transport system.

They said they did not mind sweating to save fuel.

Mr Banyat would walk 400m from his house in Sukhumvit Soi 62 and catch a bus to the nearest skytrain station. He would take a train to Victory Monument and hop on another bus for the final leg of his journey to parliament.

Mr Banyat, who usually travels in luxury, said he was happy to do his bit for the campaign and instructed his deputies and provincial governors to do likewise.

Mr Vatana said he would catch a bus on Pattanakarn road, disembark at Saphan Makkawan and walk the rest of the way to work.

He was familiar with public transport having travelled by bus from Samut Prakan to the city during his school days.

The deputy interior minister, who also runs an oil import business, emphasised the importance of saving energy and said the nation's retail petrol cost was reduced by modest oil duties.

The Bangkok Mass Transit System Corp is giving away 10,000 free tickets to skytrain commuters during the Car- free Day promotion, BTS board adviser Anat Apapirom said.

The 100-baht tickets will be handed out randomly at all 23 stations to commuters who can answer three questions on energy saving.

The Bangkok Mass Transit Authority will deploy more buses than usual to cope with the expected increase in commuters.

Chiang Mai and Phuket residents were also encouraged to leave their cars at home on Friday and asked to cycle to work.

Nirandon Pothikanont, head of the Sunday Bicycle Club, said his group supported the Car-free Day campaign.

The club wanted to continue the scheme beyond Friday to lessen traffic congestion and dependence on expensive petrol.

Trang governor Chalermchai Preechanont said he would ride a bicycle to work on Friday to raise awareness about the campaign.

http://www.bangkokpost.net/today/210900_News04.html

-- Carl Jenkins (Somewherepress@aol.com), September 21, 2000

Answers

"Volatile capital flows." Them's the operative words.

Sounds like a replay of the 1997 Asian financial crisis is in the making.

-- JackW (jpayne@webtv.net), September 21, 2000.


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