BOT and US Treasury announce three key agreements on exchange rate policy

The US Department of the Treasury and the Bank of Thailand (BOT) published a joint statement on Tuesday outlining their cooperation in the foreign exchange market. 

According to the statement, it says: As trusted partners, the United States Department of the Treasury and the Bank of Thailand agreed to continue their close consultations on macroeconomic and foreign exchange matters.  

The United States Department of the Treasury and the Bank of Thailand reconfirmed they have undertaken under the IMF Articles of Agreement to avoid manipulating exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain an unfair competitive advantage.

In addition, they agreed that:

• any macroprudential or capital flow measures will not target exchange rates for competitive purposes;
   
• other government investment vehicles such as pension funds will not be used by the United States Department of the Treasury and the Bank of Thailand to target the exchange rate for competitive purposes; and
   
• in cases when intervention in foreign exchange markets may be considered, it should be reserved for combatting excess volatility and disorderly movements in exchange rates, with the expectation that this tool would be considered equally appropriate for addressing excessively volatile or disorderly depreciation or appreciation.

The United States Department of the Treasury and the Bank of Thailand agreed on the importance of transparency of exchange rate policies and practices.  Both parties commit to public disclosure of:

• any foreign exchange intervention operations on at least a semiannual basis with a quarterly lag; and
   
• foreign exchange reserves data and forward positions according to the IMF’s Data Template on International Reserves and Foreign Currency Liquidity on a monthly basis.

BOT confirms adherence to US guidelines in exchange rate policies

Chayawadee Chai-anant, Assistant Governor of the BOT’s Corporate Relations Group, revealed that this statement is part of ongoing trade negotiations with the United States. The key points of the statement are as follows:

• Both parties will not use exchange rate policies to gain a competitive advantage, but rather to manage excessive volatility or address abnormal exchange rate movements.
   
• Both parties will increase transparency in reporting the management of exchange rate stability, with more frequent updates.
   
• Both parties will disclose international reserve data in line with the International Monetary Fund (IMF) format on a monthly basis, a practice that the BOT has already been following.

“What's been announced is not new; the BOT has already been complying with US guidelines,” Chayawadee added.