The Bank of Thailand (BoT) said on Saturday (October 1) that it had intervened in the foreign exchange market to reduce the volatility of the baht.
The baht has fallen 11.7% once morest the US dollar this year, which the central bank says is due to the strength of the dollar.
However, the baht’s weighted index once morest other currencies remained stable, while the country’s external position and banking system remain strong, Deputy Governor Mathee Supapongse told reporters on Saturday.
The weighted average interbank exchange rate at the close of business on Friday was 37.915 baht, according to the central bank’s website.
“We sometimes entered the market to slow down the volatility (of the baht),” Mathee said, adding that the BoT had no target for the level of the baht.
The decline in the country’s international reserves is not due to currency intervention but rather to asset valuations, he added.
See : Is the Bank of Thailand acting to keep the baht high?
Despite the wide spreads between Thai and US rates, Thailand has attracted capital flows, he added.
Foreign investors have bought 150 billion baht worth of Thai stocks since the start of the year, but have sold 33 billion baht worth of bonds.
Central bank governor Sethaput Suthiwartnarueput reiterated his view that a gradual and measured tightening of policy was appropriate to support the country’s still slow economic recovery, but he was ready to adapt if necessary.
On Wednesday, the BoT raised its key interest rate by a quarter of a point to 1.00% in order to curb inflation that has been high for 14 years.
Some economists said that was not enough to bring consumer price inflation, which is over 7%, under control and to stabilize the baht.
But the need for financial stability, one of the BoT’s three main goals, prevents monetary policymakers from raising interest rates too quickly, Mathee said.
While economic growth and inflation trends may argue for a faster normalization of monetary policy, this would jeopardize financial stability, he added.
“We can’t increase rates in a savage and rapid way because we have to find a balance between the three objectives,” he said.
He added that the central bank needs to think regarding debt-sensitive groups that will suffer from the rate hike.
Furthermore, the Thai economy has yet to recover to pre-crisis levels and inflation is likely to decline in the future.
“Thailand’s policy response is different from other countries because we want to ensure a smooth take-off,” Sethaput said, given that inflation in Thailand has not been demand-driven like in United States.
He also stressed the need to reduce the level of Thai household debt to less than 80% of gross domestic product – the level prescribed by the Bank for International Settlements – from almost 90% currently.
High household debt is likely to hamper economic recovery, he said.
The central bank predicts economic growth of 3.3% this year, the slowest in Southeast Asia.
Next year, growth is expected to improve slightly to 3.8%, although lower than the 4.2% previously forecast.
Headline inflation is expected to average 6.3% this year and return to the target of 2.6% next year.
Source : Bangkok Post
