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BoT monitoring impact of renewed capital inflow on baht

BANGKOK, Nov 5 – The Bank of Thailand (BoT) is closely monitoring the renewed influx of foreign capital inflow into the Thai economy and its impact on the baht movement following the United States Federal Reserve’s decision to inject an added US$600 billion in the economic system under the second round of its Quantitative Easing (QE2) measure to stimulate the US economy, according to a senior BoT official.

Director Vachira Arromdee of the BoT Exchange Control and Credits Department said the central bank would assess how much the Fed’s plan to buy the additional $600 billion in government bonds by the middle of next year as part of the QE2 measure would encourage further capital inflow because it could fuel the baht's strengthening.

However, she said the Fed’s move was not beyond the market expectation. It did not make investors in the Stock Exchange of Thailand panic since the news had been already absorbed to a certain extent.

“We are worried about possible impacts of the measure and monitoring how extensive it will affect the baht. We plan to discuss the matter with the SET first,” she said.

Asked whether the QE2 measure would encourage the capital inflow into Thailand and the central bank would issue more measures to oversee the baht, she said the bank was keeping a close watch on the matter.

Whether it would issue additional measures to rein in the capital inflow depends on timing, she said, adding that the bank needed to take into account long-term repercussions before making a decision on the matter. (MCOT online news)

-- TNA 2010-11-05

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Summary: BOT is watching the currency train go by.