Companies ordered to reduce stocks
Thai Finance Minister Thanong Bidaya yesterday ordered Thai-based companies to trim their stocks in an effort to bring more stability to the baht.
He said the baht was 'too low' and did not reflect its 'true value'.
He said the currency had been undermined by private companies that had attempted to cash in on a falling baht by holding on to their US dollars as long as possible.
Under the new rules announced yesterday local firms will only be able to hold dollars for a maximum of 120 days, down from the previous 180 days.
'Bringing down the maximum holding period for dollars will cut the speculation in the dollar and bring more stability to the baht,' Mr Thanong said.
'The baht has been firmer [during the last couple of days] and we expect it to move to a better level soon.' The currency has lost a third of its value since the central bank was forced to scrap a 13-year-old link to a dollar-dominated basket of currencies on July 2.
Mr Thanong said last week the authorities saw the baht settling at about 29 baht (about HK$6.39) to the dollar in the long term. Although the central bank would intervene to 'smooth' trading in the baht, it would not attempt the impossible task of tackling the foreign currency markets head on.
The finance minister also said that to ease the liquidity shortage, the required percentage of liquid assets commercial banks and finance houses must retain had been cut from 7 to 6 per cent.
'We clearly understand that many companies, even good companies, are having liquidity problems . . . this should help,' Mr Thanong said.
He said the measures had been approved by the council of economic ministers at their weekly meeting.
The Bank of Thailand devastated local financing when it closed 58 out of 91 finance houses a month ago.
Many foreign investors, fearing a financial meltdown, have repatriated their money, and many foreign lenders have been reluctant to roll over foreign currency loans to Thai firms.
The central bank said capital outflow between May and June was 79.2 billion baht.