Foreign Exchange Market
‘Foreign exchange market’ is a
market for trading and exchanging any pair of currencies. The value (price) of
one currency in terms of another currency is known as ‘foreign exchange rate’
e.g. the exchange rate between Thai Baht (THB) and US Dollar (USD), and the
exchange rate between Thai Baht and Chinese Renminbi (RMB). The exchange rate
movements are determined by demand and supply for the currencies over time.
Such demand and supply are derived from international trade value,
international capital flows and market’s expectation.
Thailand has adopted the managed
float exchange rate regime since July 2, 1997. The Bank of Thailand (BOT) has
implemented the foreign exchange management framework that aim to maintain its
stability. The BOT does not target the exchange rate at any specific level, but
monitors and oversees the exchange rate movements to be in line with economic
fundamentals and not too volatile as it might deter economic sector adjustment
and cause severe adverse impacts on the economy.