BOT ensures gold trading in baht still allowed and informs market to prepare for reference rate transition

The Bank of Thailand (BOT) said on Thursday that it will still allow gold trading in baht, not only for foreign currency.

Vachira Arromdee, an assistant governor, said that the central bank revised its gold trading regulations to provide more options for investors, such as for online trading. 

Investors can choose to trade in baht or foreign currency via the Foreign Currency Deposit (FCD) account. It will still be capable of trading in baht in gold shops as usual.

The modification in trading rules to cope with the strong baht appreciation is under the Ministry of Finance for approval, which will not be mandatory, she added.

On Thursday’s morning trading, the baht surged by 0.2 per cent to US$31.31.

Reference rate transition

Vachira said that the LIBOR reference rate discontinuation at the end of 2021 is a significant twist in the global financial markets.

Consequently, the BOT will no longer compel the Thai Baht Interest Rate Fixing (THBFIX) as LIBOR is a component of THBFIX calculation.

With that in mind, the change in the Thai reference rate with a significant amount of outstanding LIBOR transactions will be affected directly and indirectly with THBFIX.

The BOT will supply a fallback THBFIX rate (THBFIX) for clients with outstanding THBFIX as a replacement at the same reserves rate as the original.

Meanwhile, commercial banks will prepare plans for the LIBOR transition to ensure the process runs smoothly and fairly, according to the BOT. 

The BOT also recommends participants with THBFIX referencing to study the new Fallback THBFIX rate and consult with commercial banks in advance to amend existing contracts so they can swap to the new reference rate. 

The new reference rate or the Thai Overnight Repurchase Rate (THOR) has been developed to reflect domestic financial situations and is set to become more widespread among market participants in the future.

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