THE Export-Import Bank of Thailand (Exim Bank) warned exporters not to speculate on the Thai baht exchange rate as this is very risky, Thai News Agency said this morning.
The bank’s managing director Pisit Serewiwattana said although the Thai baht has been strengthening continuously, exporters should not dabble with currency speculation because it is unsafe to do so.
He also revealed that total amount of currency hedging by exporters increased by 20% in the first seven months of this year but it is big exporters who usually do so although the jump in the total shows more SMEs are joining in.
Up to 95% of large exporters not only hedge against currency fluctuation they also take out export credit insurance.
However the 20% jump in the volume of currency hedging in the seven-month period also shows 600 exporters had opted to do so with this indicating that more SMEs had joined in.
Mr Pisit added that his bank is currently supporting currency hedging with an example being if an exporter takes out 500,000 baht working capital loan the hedging cost is usually 1% or 5,000 baht but a promotional rate currently offered reduces this to just 1’500 baht.
Exim Bank is also going to introduce an online hedging application next year to make it more convenient for exporters.
Meanwhile a Reuters report published by CNBC said the US dollar edged higher against the yen today, trading above last week’s near 4-month low, with rising tensions between the United States and North Korea seen as the key to the near-term outlook.
In addition to worries over geopolitical risks, the dollar came under pressure on Friday after softer-than-expected inflation data for July dampened expectations for another Federal Reserve interest rate hike this year.
The dollar inched up 0.1 percent to 109.29 yen, edging away from Friday’s low of 108.72 yen, the greenback’s lowest level since April 19.
Heightened tensions between the United States and North Korea, which triggered falls in riskier assets last week, are seen likely to remain a focal point for markets in the near term.
“This uncertainty isn’t going to disappear immediately,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.
“The dollar is now close to the bottom of a 108 yen to 115 yen range. If tensions escalate further, then there would be an increased risk of a drop to levels below 108 yen,” he said.
Top: The Thai currency has been strengthening continuously for sometime now . Photo: Reuters via International Business Times