The central bank's statement was in reaction to earlier news reports that the BOT had intervened in the currency market to calm its recent appreciation against the US dollar.

BOT governor Mr Pridiyathorn Devakula said yesterday that the flow of foreign capital into the country had fallen compared with the amount and pace of inflow at the beginning of the year.

It was reported that the baht had depreciated to Bt37.70 against the greenback on Tuesday due mainly to the BOT's intervention in the currency market as well as the private sector's rising demand for dollar.

The baht, however, was relatively weak compared to other currencies in the region on Tuesday due to the continuouing political uncertainty.

But by the end of the day it had risen to Bt37.52.

The currency depreciated slightly yesterday with the opening rate of Bt37.55 against the dollar, weakened by 0.03 per cent from Tuesday and 0.15 per cent from the end of last month. The baht closed yesterday at Bt37.65 against the greenback.

Since Tuesday the baht had also weakened by 0.49 per cent against the Euro and 0.31 per cent against the Japanese yen.

In April, the baht strengthened to Bt37.5 against the dollar, marking a six-year high due to a high amount of capital inflow.

According to the central bank, US$11.5 billion of capital has been flooding into the country over the past four months as foreign investors left their dollar-dominated assets amid concerns about the twin deficit problem in the United States.

Asked if the central bank needed to raise policy interest rates further once the real deposit interest rate entered positive territory, the governor said he had not yet considered

the issue.

Meanwhile, Tarisa Watanagase, the BOT's deputy governor, said although interest rates had been rising, debtors had not yet been affected significantly. They have already expected the rate hikes and adjusted to the changing environment.

The BOT, however, will take a close look at banks' existing debtors as they are expected to have a higher burden from the rate increases than new debtors.

"They have not shown any symptoms of distress because the lending rates remain low. But the central bank has kept a close eye on them," said Tarisa.

She said commercial banks had also been more cautious when it comes to loan expansions by offering floating-rate lending packages instead of fixed-rate loans.

Anoma Srisukkasem

The Nation