BOT queries effectiveness of ECB stimulus, expects little market reaction
The Bank of Thailand says the European Central Bank's decision to maintain its main interest rate at 0.05 per cent was expected, but the lack of clarity on its stimulus measures could affect investor sentiment.
However, as no action was taken this week by the ECB, there should be no significant reaction from the global markets and capital flows should remain unchanged.
“The euro zone’s economic recovery is still weak and consumer confidence remains subdued. The ECB’s decision to maintain the benchmark interest rate was expected, but the lack of clarity in terms of how many assets it will acquire in order to increase capital in the system has raised the question of how effective its stimulus effort can be,” said BOT spokesman Chirathep Senivongs Na Ayudhya.
He said the current overall picture was that there is no concern over external factors on the Thai market and that the global markets will continue to speculate over major economies’ policies. Different countries will continue to have different policies because of the different paces of their economic recoveries.
Chirathep also said the baht had weakened by 0.6 per cent in the past two weeks on external factors, mainly the stronger US dollar, which has picked up strength from the apparent recovery of the United States’ economy.
The US Department of Commerce’s Bureau of Economic Analysis last week revised its growth estimate for US gross domestic product in the second quarter from 4.2 per cent to 4.6 per cent as the result of better-than-expected increase in non-residential fixed investment and exports.
According the Bloomberg website, the baht bounced up and down last month from 31.98 per US dollar on September 1 to 32.43 on September 30, but it has been on a weakening trend since hitting 32.21 on September 24. As of 3.30pm yesterday, it was 32.458 per dollar.
However, the BOT has noted that the baht since the beginning of the year has strengthened by 1.23 per cent, which is in line with other currencies in the region including Malaysia’s ringgit, Indonesia’s rupiah, and India’s rupee.
In other news, Chirathep said the decision by Fitch Ratings to maintain Thailand’s credit rating at “BBB+” was expected. The credit-rating agency has insisted for the past two years that the Kingdom’s economic structure is still sound and made stable by the strength of its external finances, moderate public debt and credible monetary-policy framework despite political turmoil.
He added that he expected other credit-rating agencies to maintain their “stable” outlook on Thailand for another year or two because of the country’s strong economic foundation, while Thai government bonds are still in demand, with requests for purchases 1.5 to two times what is offered each time.
The proportion of non-resident holders of Thai government bonds was 10.5 per cent as of September 25 for total outstanding holding of about Bt700 billion, which is slightly lower than the 10.7 per cent at the end of August.
