Bank failure causes volatile forex
Containers in a port operated by the Port Authority of Thailand. Exchange rates are fluctuating following the recent US bank collapse, which is likely to mean higher prices for shippers.
Thai exporters and importers are advised to closely monitor the exchange rate and develop appropriate strategies to manage the impact of short-term currency fluctuations.
According to Poonpong Naiyanapakorn, director general of the Trade Policy and Strategy Office (TPSO), the office expects exporters to be affected by volatile exchange rates caused by the impact of recent US bank collapses.
This should rattle money and capital markets in the United States, prompting investors to move money to new markets, including Thailand, resulting in a weaker U.S. dollar and a stronger baht, he said.
On 13 March, the baht had strengthened to 34.56 per dollar, compared with 35.08 per dollar on 10 March. This will result in higher export prices for shippers, but may benefit importers, especially for energy products.
TPSO plans to monitor the situation to determine whether there will be a continued impact on the US labor market and economy, which could affect Thailand’s exports, as the US is a major market for shipments, accounting for 16% of Thai exports, Mr. Poon Pong.
“The impact is expected to be limited, not as severe as the 2008 US subprime crisis, which had widespread effects on financial and capital markets as well as the economy,” he said.
“The US subprime crisis was initially caused by loan extensions to unsecured borrowers, resulting in a ripple effect for the economies of many countries with links to the US economy, including Thailand. Silicon Valley Bank [SVB] the crisis has specific characteristics, with most of the customers’ depositors unsecured, unlike the majority of banks in the United States.”
Sir. Poonpong said this event had a short-term psychological effect on investors, leading to a sell-off in risky assets and investors holding cash to reduce risk and waiting for the situation to become clearer.
The Bank of Thailand sees the impact on the banking sector as limited, with Thai commercial banks maintaining a strong position bolstered by central bank supervision and adherence to the Basel criteria for managing liquidity risk, including measures to tighten lending following the 1997 Tom Yum Kung financial crisis.
Suwannee Jatsadasak, assistant governor of the Bank of Thailand, said in a statement on Monday that the SVB fallout would have a limited impact on Thailand’s financial stability because local commercial banks have no direct exposure to the troubled US bank.
In addition, the total exposure of local banks to startups and fintech companies globally represents a marginal level of less than 1% of Thai banks’ capital, she said.
No local banks invest in digital assets, while their subsidiaries invest in digital assets worth about 200 million baht.
The central bank strictly supervises their investments in digital assets and venture capital.