Thailand plans to sign a bilateral currency swap agreement this week worth 7 billion yuan (RM3.5 billion) with China’s central bank to help facilitate international trade between the two countries, the Bank of Thailand said yesterday.
“This agreement will help Thai business to directly exchange yuan currency with the baht when necessary and they do not need to do it via the dollar,” Thai central bank Governor Prasarn Trairatvorakul told reporters in the southern Thai seaside town of Hua Hin.
“This will help promote the use of yuan for international trade.”
The agreement would be one of five to be signed with China on Thursday, he said, adding that the central bank had received an approval to invest in the interbank bond market in China.
The central bank has seen about $2 billon (RM6.4 billion) fund inflows which were flood-related insurance claims, but the impact on the baht was offset by sales of equities and bonds by some foreign investors to reduce risk, Prasarn said.
“That helps keep fund flows in balance,” he said, adding the baht was expected to be volatile in the short term due to global economic uncertainty.
Meanwhile, factory operators can keep their insurance claims in foreign currency deposits with unlimited amount and they can reimburse from the accounts when they want to buy new machinery, Prasarn said.