Thais to be allowed to invest more abroad as FX rules eased

[BANGKOK] Thailand's central bank said on Monday it would relax foreign exchange rules, including taking steps to allow more Thais to invest in securities abroad, in a move that analysts said could help contain an uncomfortably strong baht currency.

The central bank will allow investors with assets of at least 50 million baht (S$2.02 million) to directly invest in securities abroad of up to US$1 million per year, effective by the end of 2017, it said in a statement.

Commercial banks will also be allowed to lend baht to non-residents for investment in Thailand and the Greater Mekong sub-region, effective this month, it said.

"The moves are aimed at enhancing ease of doing business and will not affect the central bank's responsibility to maintain financial stability," Bank of Thailand Veerathai Santiprabhob told a news conference.

Analysts said the measures would help counter some of the baht's strength, and help exports needed to generate faster economic growth.

The baht, however, hit a near 23-month high of 33.94 per dollar after the measures were announced, as investors had been expecting stronger steps.

The baht has appreciated by more than 5 per cent against the dollar this year, making it the best performing currency in Southeast Asia.

"Despite the baht's strength, it's still moving in line with regional currencies and with economic fundamentals. Its volatility remains low - in mid range of the region. The central bank is monitoring it closely," assistant governor Vachira Arromdee said reporters.

Though interest rates are at a record low of 1.5 per cent, Thailand is running a hefty current account surplus and foreign exchange reserves have risen by US$12 billion this year to stand at US$184 billion.

A US$29 billion balance on the Bank of Thailand's forward book, however, hints at heavy intervention in the currency market to keep the baht from appreciating even further.

REUTERS