BOT warns institutions allowing baht speculation

31.01.18

The Bank of Thailand (BOT) has issued a warning to financial institutions in Thailand to cease transactions that may counter measures to prevent speculation on the baht.

BOT assistant governor for Financial Markets Operation Group Vachira Arromdee said that after more rigorously monitoring foreign exchange transactions, some financial institutions in Thailand were found to have facilitated businesses that appeared to contradict the central bank’s measures to prevent speculation on the baht. The BOT has imposed penalties on these financial institutions and warned them against such activities.

There are several types of penalties, from warning and fines to ceasing transactions. The concerned banks had acknowledged the situation and the central bank believes their operators will be instructed to engage in transactions that strictly follow the measures, she said.

Vachira said the BOT continues to monitor and inspect foreign exchange transactions closely, while reviewing additional measures to boost efficiency to follow up on capital movements.

The Thai currency remained steady at Bt31.41 to the US dollar yesterday morning, unchanged from the previous close, as markets were waiting for the US Federal Open Market Committee (FOMC) meeting and foreign purchase of the US dollar prevented appreciation of the baht.  

Jitipol Puksamatanan, a strategist at Krungthai Bank, said that investors kept an eye on the movement of US bonds after the 10-year bond yield rose to its four-year high at 2.73 per cent, signalling a faster rise in the US interest rate in keeping with the strengthening US economy. As a result, the US dollar also appreciated by 0.3 per cent against the euro and by 0.7 per cent against the pound sterling on Monday night.

In Bangkok, foreign purchases of the US dollar helped prevent appreciation of the baht even as most traders kept a watch on the FOMC meeting and clarification of US plans from US President Donald Trump mid-week. The baht is expected to depreciate slightly.

According to the Thailand Gold Traders Association, the local price of gold bars fell by Bt100 to Bt19,950 per baht weight. The global gold price stayed at US$1,337 an ounce.

The price of gold fell to its one-month low amid a slight rise in US inflation.

The global gold price fell $9.17 an ounce as the core rate, excluding food and energy, on the US personal consumption expenditure – the Federal Reserve’s preferred inflation gauge – edged up 0.2 per cent last December, YLG Bullion International Co Ltd said.

The rise in US inflation has raised investor expectations that the US central bank may hasten its plan to raise the interest rate to four times this year, boosting US bond yield and paving the way for a US dollar rebound from its three-year low, but prompting profit-taking in gold markets.