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[ 2015-05-29 ]

Weaker baht benefits exporters

The baht is expected to retreat further against the US dollar, and its positive effect on exports should be apparent in the third quarter, says Deputy Prime Minister MR Pridiyathorn Devakula.

He said exporters typically took orders up to four months in advance, so the impact of the baht's pullback should be witnessed in that quarter.

MR Pridiyathorn Devakula also insisted the baht was not weakening too quickly, as it has taken several weeks to fall to the present level.

The local currency this month sank to its lowest level in nearly six years as foreign investors shunned local assets over worries about Thailand's economic health.

The baht has slipped at a relatively rapid pace since the Bank of Thailand's rate-setting panel unexpectedly cut its policy rate by a quarter-percentage point for a second straight meeting on April 29.

The central bank described the unexpected cut to 1.5% as harsh medicine to ward off downside risks to growth after exports contracted in the first quarter and public spending faced delays.

The central bank's further relaxation on capital outflows, announced the day after the rate cut, is another force pulling down the baht.

The weaker baht helped Thai exports to fall at a slower pace last month.

The Commerce Ministry reported April exports declined by 1.7% year-on-year to US$16.9 billion, a fourth consecutive month of contraction but an improvement from a 4.45% decline in March, 6.15% in February and 3.46% in January.

The dismal export performance has been blamed for the country's economic doldrums, as exports account for 60-70% of GDP.

The baht traded at 33.77/33.79 against the greenback yesterday compared with 33.85/33.88 on Wednesday.

In the meantime, Bank of Thailand governor Prasarn Trairatvorakul said the overall weakening trend in the baht should benefit exporters when converting back to the Thai currency, but product quality and demand would still influence the export outlook.

"For instance, farm product prices have declined because demand for them is down," he said.

"Rubber sales may not improve even if we move to lower the foreign exchange rate even though rubber exporters would gain more profit in baht terms."

However, the volume of global trade has declined in recent years despite the US economic recovery, and analysts believe foreign exchange could play a greater role in supporting export value since global purchasing power remains weak, Mr Prasarn said.

Source: Bangkok Post

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