BOT acts to soften baht fall
Bank of Thailand has since last week sold a sizable sum of US dollar to stabilise the volatile foreign exchange rates, said governor Prasarn Trairatvorakul.
He said that this is to prevent a too rapid fall in the Thai baht against the green back and to unload parts of the huge foreign reserves. Prasarn noted that in doing so, the BOT has tried not to move against the market movement.
Capital inflows in the first months of this year resulted in an increase in foreign reserves and baht appreciation. The tide reverses now. Foreign investors are switching funds back to the US, after some economic indicators showed improvement and may encourage the Federal Reserve to taper the quantitative easing.
Prasarn noted that the markets should not overreact to the rapid depreciation of the baht or the sudden plunge in the stock market, as that is in line with global movements.
He admitted that the weaker baht could slightly push up inflation, as Thailand remains the net energy importer. However, the impact would be minimised on comparatively low energy prices.
Thai baht fell below 31.06 per dollar for the first time in 9 months. The currency opened at 31.06 today, weakening by 2.50 per cent from end-May (30.29 per dollar) and 0.39 per cent from yesterday.
Yesterday, it touched 31.16 before closing firmer at 30.93.
Thai baht has also weakened against euro and Japanese yen. It opened at 41.48 against euro today, losing 5.31 per cent from end-May. Meanwhile, per 100 yen, it depreciated by 7.73 per cent during the same period to 32.66.
