The Bank of Thailand (BoT) said on Saturday (Oct 1) that it had intervened in the forex market to reduce the volatility of the baht.
The baht has fallen 11.7% against the US dollar this year, which the central bank says is due to the strength of the dollar.
However, the baht’s weighted index against 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.
“Sometimes we enter the market to reduce (the baht’s) volatility,” Mathee said, adding that the BoT did not have a target for the baht level.
The decline in the country’s international reserves is not due to foreign exchange intervention but to asset valuations, he added.
See: Is the Bank of Thailand Taking Action to Keep the Baht High?
Despite wide spreads between Thai and US rates, Thailand has attracted capital inflows, he added.
Foreign investors have bought 150 billion baht worth of Thai shares since the beginning 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 policy tightening was appropriate to support the country’s still-slow economic recovery, but was ready to adapt if necessary.
On Wednesday, the BoT raised its key interest rate by a quarter point to 1.00% to curb inflation that has been high for 14 years.
Some economists said that was not enough to control consumer price inflation, which is over 7%, and to stabilize the baht.
But the need for financial stability, one of the BoT’s three main goals, prevents 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, it added.
“We can’t wildly and rapidly raise rates because we have to strike a balance between all three goals,” he said.
He added that the central bank must think about the 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.
“The political response of the Thaïlande is different from celle des autres pays, car nous voulons assurer un décollage en douceur”, declared M. Sethaput, étant donné that the inflation in Thaïlande n’a pas été determined by the demande comme aux USA.
He also stressed the need to reduce the debt level of Thai households to less than 80% of gross domestic product, the level prescribed by the Bank for International Settlements, from nearly 90% today.
High household debt is likely to hamper economic recovery, he said.
The central bank forecasts economic growth of 3.3% this year, the slowest in Southeast Asia.
Next year, growth is expected to improve slightly to 3.8%, although down from the 4.2% previously forecast.
Headline inflation is expected to average 6.3% this year and return to the 2.6% target next year.
Source: Bangkok Post
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