The Bank of Thailand (BoT) governor Veerathai Santiprabhob says that Thailand’s central bank has the tools and capabilities to keep the baht tamed.
In a seminar held last February 23, the chief of the central bank spoke in front of an audience hosted by the Land and Houses Bank. He emphasized that BoT is capable of curbing capital flows if the need arises using various financial instruments. Because of this, he believes that Thai assets and the baht can be considered as safe havens as they are supported by foreign reserves across the globe.
In an article of the Bangkok Post, Mr Veerathai is quoted saying, “Thailand currently has reserves of around US$200 billion, including US dollar forwards, representing the 12th-highest foreign reserves in the world. These kind of money flows into the country strengthen the baht, which, in our opinion, is not good for the Thai economy.”
Money flows in and out of Thailand at a steady pace. This movements cause volatility for the baht but it is also seen as a boost for foreign investments. Thai capital and bond markets are benefiting from this in the short-term.
The Thai baht climbed by 0.03 to 34.99 against the US dollar. Reuters data shows that the national currency added a total of 2.4% so far for this year. In comparison, the Indonesian rupiah and the Malaysian ringgit only advanced by 0.9%.
As quoted by the Bangkok Post, Mr Veerathai further explained, “These kind of money flows into the country strengthen the baht, which, in our opinion, is not good for the Thai economy. In the current stage of a highly fluctuating world, it’s the central bank’s duty to have a wide range of policy instruments in its menu to be ready to use.”
He confirmed that if the baht needed it, the BoT can utilize its policy instruments to help control baht fluctuations as opposed to using a floating exchange rate.
All in all, Mr Veerathai expressed confidence in the economy of Thailand. He hopes for the nation to have a better recovery for this year after the rough patch last 2016 when multiple geopolitical events occurred including the death of their revered king. The BoT set the GDP forecast for 2017 at 3.2%.
On March 29, BoT’s Monetary Policy Committee will examine the forecast and announce the predictions for next year, 2018.