Turmoil on the foreign currency markets following Thailand’s decision last week to float the baht will soon subside, Finance Minister Hiroshi Mitsuzuka predicted July 11.
News services quoted sources July 11 as saying that Japan will extend up to $1 billion dollars in emergency loans to Thailand, with U.S. Treasury securities to be used as collateral.
Adding that Japanese financial authorities remain in close contact with their Thai counterparts, Mitsuzuka told a regular news conference that various factors affect foreign exchange markets, and that Japanese authorities would continue to monitor market movements. Thai Finance Minister Thanong Bidaya is expected to visit Tokyo next week to seek advice from Japan concerning its unstable currency, and some observers say they believe he will seek Japanese financial assistance.
“We basically support (Thailand’s) move to float the baht, as does the International Monetary Fund, but to date there has been no specific request for aid” from Bangkok, Mitsuzuka said. Last April, Japan signed dollar-loan agreements with seven Asia-Pacific nations, including Thailand, to help contain currency crises.
Under the agreement, if a currency suffers wild fluctuations, Japan would supply up to $1 billion in loans to that country, using that nation’s U.S. government securities holdings as collateral. On July 2, Thai authorities released the baht from evaluation against a basket of currencies dominated by the dollar, in a desperate attempt to boost its economy. The baht lost 20 percent of its value the same day as the move shook Southeast Asian markets, many of which have currencies basically pegged to the dollar.
The confusion has also spread to the Philippines, which announced earlier July 11 that it would allow its peso to float in a wider range in an attempt to ward off more speculative currency trading. Baht trading has calmed down, and Tokyo must first see how the Thais themselves assess the situation, the source said.