On November 6, 2019, the Bank of Thailand (BOT) announced the “Relaxation of rules to facilitate capital outflows and lessen pressure on the Thai Baht", while the Monetary Policy Committee (MPC) resolved to cut its policy rate to 1.25 percent. Their concurrent actions have caused the Baht to weaken slightly.
The BOT's latest action, aimed at stimulating capital outflows follows the announcement of its measures to enhance the surveillance of short-term capital inflows in July 2019, which include reducing the limit on outstanding balance of Non-resident Baht Account (NRBA) and increasing the reporting requirements of non-residents' holdings of debt securities. The relaxation of rules to stimulate capital outflows, which are scheduled to be effective on November 8, 2019, will involve exporters, investors and the general public. They include: 1) Allowing exporters to keep foreign currency proceeds overseas; 2) Allowing retail investors to invest in foreign securities; 3) Allowing businesses and individuals to transfer funds aboard more freely; and, 4) Allowing Thai investors to trade gold through FCD accounts with designated gold trading companies that have received approval from the BOT.
KResearch is of the view that the relaxation of rules to allow capital to flow out more freely may help create a balance in capital movements somewhat via slowing the buying of Thai Baht (selling of US Dollar) as a result of the conversion of foreign currency proceeds into the Baht by exporters and gold traders, as well as stimulating the buying of US Dollar (selling of Baht) per securities investment abroad by Thai investors or outward funds transfers by Thai individuals.
In summary, the implement of BOT's measures to supervise the Baht is undertaken in conjunction with other previous measures while the US Dollar movement will be a key factor determining the Baht outlook. However, KResearch expects that the BOT will have more tools and measures to ensure the Baht's stability if needed. This coupled with better outlook towards the US economy, Thai currency will likely be more stable, going forward.