BOT keeps watch on intervention in HK

She said there was research suggesting Hong Kong might change its monetary policy, and some groups of investors have speculated that the territory could adjust the value of its currency.

"We are monitoring Hong Kong closely on a day-to-day basis, to see whether any pressure remains. We are also keeping a watch on whether it will adjust the value of its currency," she said, adding that she expected Hong Kong to be able to cope with the situation in the short term.

On Tuesday, Hong Kong intervened in the foreign-exchange market after its dollar appreciated to touch the upper limit of the territory’s band. The Hong Kong authorities employ the currency board, pegging the unit to the US dollar.

According to news reports, Hong Kong made four market interventions from October 19 to October 24, using about HK$14.4 billion (Bt57 billion) to keep the currency in the range of 7.75-7.85 per US dollar.

Siri Karncharoendee, a member of the BOT board of governors, said the governors at their meeting yesterday had asked the central bank to monitor the situation in Hong Kong closely on concern that if the territory has problems, they could affect exchange-rate systems across the world.

Investment in low-rating foreign govt bonds

Meanwhile, the central bank yesterday gave the green light to investment in foreign government bonds with low credit ratings. However, such ratings must not be below investment grade.

Suchada Kirakul, adviser to the BOT governor, said the board meeting had discussed the scope of investible assets that could be used to reduce its accumulated loss.

The meeting decided that the BOT could invest foreign reserves in government bonds with lower credit ratings of at least investment grade, as it needs to manage investment from the reserves in order to produce a greater return.

Although the board approved such use of the foreign reserves, the authority to make investment decisions and manage the investment portfolio remains with the central bank’s officials.

Suchada said the meeting considered whether the BOT could invest in Indonesian government bonds, now that Moody’s had assigned the country’s sovereign debt as investment grade. However, Indonesian debt has not yet been assigned investment-grade status by Standard and Poor’s.

Kanit Sangsubhan, a member of the BOT board of governors, said the meeting had also discussed progress of the plan to resolve the central bank’s accumulated loss.

The bank has made relatively good progress on the plan, including the promotion of overseas investment, investment of the foreign reserves in more types of instruments, and the approval of investment in foreign government bonds, Kanit said.

Investing in Indonesian bonds is attractive due to the 5-per-cent return on offer, which is higher than the return on Thai government bonds, Siri said.