EXPORTERS URGED TO COVER RISK

       Exporters have been advised to cover their currency risk, with the baht likely to remain volatile against the greenback toward yearend and both the euro and yen having strengthened in recent months. The Thai unit is however expected to remain strong at around 33-33.50 per dollar.
       The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
       The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
       "It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
       The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
       However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
       The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
       Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
       Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
       Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
       He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
       Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
       The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
       "It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
       Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
       However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
       Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
       Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
       Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
       "The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
       The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
       However, the rubber products, rice and sugar sectors will experience difficulties.
       Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
       Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
       According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.