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Bank of Thailand (BoT) Governor Prasarn Trairatvorakul conceded the baht would remain volatile next year as a result of continued capital inflows.
Speaking during a meeting with representatives of the Thai Chamber of Commerce on the “Adjustment of Thai Economy under the Monetary Policy Framework,” he said that US$30 billion of foreign capital had so far flowed into Thailand.
Of this, $12 billion is revenue earned from Thailand’s exports of products and services, $1.5 billion is capital flowing into the stock market, $4.5 billion into the bond market and the remainder are foreign direct investments.
A large amount of capital flowed into Thailand in third quarter of this year, but there was a capital outflow in November.
He said the central bank continued to intervene in the baht’s movement to ease the currency fluctuation, but it would not peg the baht at a particular level because it runs a risk of being attacked.
The Bank of Thailand (BoT) raised the policy interest rate to 2%
The Bank of Thailand (BoT) on Wednesday raised the policy interest rate by 0.25 per cent from 1.75 to 2.00 per cent, effective immediately, BoT Assistant Governor Paiboon Kittisrikangwan said.
The decision was made by the Monetary Policy Committee.
It is less important to maintain the current extra-accommodative monetary policy stance when Thailand’s economy is expected to grow at 7-8 per cent this year and 3-5 percent next year, Mr Paiboon said.
As a result, the interest rate should be readjusted to a normal rate after the BoT kept it low for the past two years.
The Monetary Policy Committee raised the interest rate by 0.25 per cent at its last two meetings, in July and August, consecutively.
New Investors focus on emerging markets
Emerging markets, particularly in Asia, would become interesting places, because they would lead the economic recovery, while the US would remain an interesting market because of attractive asset prices.
The appreciation of the Thai baht is not caused by capital inflows but the Bank of Thailand (BoT) has been asked to keep a close watch on the currency’s appreciation and prepare measures to cope with capital inflows for currency speculation as the monetary unit hits a two-year high, Finance Minister Korn Chatikavanij said.
The finance minister told reporters that the meeting resolved that the weak US economy and its debt burden has pushed the baht to become stronger in tandem with other currencies.