BoT: Capital outflows not excessive

Capital outflows from Thailand's financial market are not expected to be excessive given the financial market has already priced in the impact of the US Federal Reserve's monetary stimulus tapering, says a senior Bank of Thailand official.

Spokesperson Roong Mallikamas said the baht has moved in a limited range because the Fed's tapering was expected as was the domestic political stalemate.

Central bank officials expect the baht to move according to market supply and demand, she said. But this could change if the Fed deviates from its tapering stance.

The Federal Open Market Committee held its first meeting this year from Jan 28 to 29, with many expecting the group to reduce its monthly bond purchases by US$10 billion to $75 billion per month as announced in December.

The Fed started its current round of quantitative easing in 2012.

Outgoing chairman Ben Bernanke is also expected to officially pass the Fed's reins to incumbent vice-chairman Janet Yellen on Saturday.

Regarding the recent emerging market sell-offs, notably in Argentina, regional currency movement has been stable and the baht remains in sound condition for the short run, unlike in 1997, said Mrs Roong.

She said the Bank of Thailand has no policy to intervene with the floating exchange rate, while inflationary pressure has been low.

Thailand's current account deficit for last year was not expected to surpass the 1% ratio and there are sufficient foreign reserves to help cushion against financial volatility, said Mrs Roong.

Commercial banks' performance remains solid, as their reserves are abundant and non-performing loans have been stable, she said.

Pressure on currency exchanges is a usual development in the financial market, and these exchanges could move in either direction depending on relevant factors, said Mrs Roong.

"For instance, the Argentine peso and Turkish lira already experienced weakening trends since last year, which were driven by both internal and external factors," said Mrs Roong.

Mrs Roong also said the Fed's tapering and lower than expected Chinese economic growth have pressured the Argentine economy and its currency because China is its main export market. In addition, the country is dealing with high inflationary pressure coupled with a drastic decrease in foreign reserves.

All of these factors have played a role in the drastic foreign capital outflows in Argentina, causing the Argentine government to intervene in the foreign exchange rate.

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Discussion 1 : 30/01/2014 at 09:17 AM
Ha! Typical central bank confidence gaming. Let's see where rates go.

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