January 17, 2018 / 8:12 AM / 8 months ago

UPDATE 1-Thai cenbank governor says will ensure strong baht doesn't hurt businesses

* Says little impact from baht’s strength on exports

* Will ensure strong baht won’t affect some businesses (Adds detail, quotes)

By Kitiphong Thaichareon

BANGKOK, Jan 17 (Reuters) - Thailand’s central bank governor said on Wednesday it would ensure local currency strength does not adversely impact certain businesses, after it found “unusual speculation” in baht trade, in comments that sent the currency lower.

Governor Veerathai Santiprabhob told reporters it had found some local financial institutions involved in the currency speculation, but noted the baht’s recent strength is expected to have only a limited impact on exports.

The baht, which hovered near a 3-1/2 year high against the dollar, eased back a little and dealers said the market feared that the central bank was ready to step in.

“We have found that certain domestic financial institutions helped customers in speculating exchange rates... and we have already investigated and taken action,” Veerathai said. He did not name the institutions.

The strengthening of the baht has been driven by a weaker dollar, Thailand’s high current account surplus and larger capital inflows, although inflows are not particularly high when compared with those of other countries.

The baht eased to 31.98 per dollar at 0705 GMT after the central bank’s comment from 31.91 earlier. But it has appreciated by 11 percent against the greenback since the start of 2017.

“The baht is not a major factor for export growth. Despite the baht’s strength, our exports have expanded well,” he said.

Exports, a key driver of Southeast Asia’s second-largest economy, jumped 10 percent in the first 11 months of 2017 from a year earlier after years of poor numbers.

The central bank forecast export growth of 9.3 percent for 2017 and 4 percent for 2018.

However, the strong baht has impacted profits of some exporters that make money in dollars but buy domestic raw materials in baht, he said.

“Therefore, in the short term we will ‘take care’ of exchange rates so that they won’t affect these groups,” he said.

The baht will continue to be volatile, so businesses should hedge against foreign exchange risks while enhancing competitiveness and productivity for higher pricing power, Veerathai said.

Additional reporting by Satawasin Staporncharnchai; Writing by Orathai Sriring; Editing by Sam Holmes

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