BOT governor MR Pridiyathorn Devakula said yesterday the baht would not return to 40 to the dollar.

He said the central bank's stabilisation measures would be implemented in accordance with how much the dollar did weaken. He would not elaborate.

However, a BOT source said the contingency plan involved a range of actions in addition to normal intervention in the currency market to keep the baht stable. It would help reduce the impact of volatility in the currency market without opposing the market mechanism.

BOT assistant governor Nitaya Piboonratanakit said one of the measures would be to accumulate major currencies other than the dollar.

Pridiyathorn said, "If the dollar depreciates to a certain level, we'll implement the first measure and then adopt other ones if the depreciation deepens further. You [Thai businesses and exporters] will be comfortable enough, because we're ready to face such a situation."

He added: "I'm concerned there will be an enormous loss of investor confidence in the US economy, with the dollar weakening sharply as a result. However, it has not depreciated much in the past, only 2-3 per cent."

Pridiyathorn said the baht's current strength was the result of capital inflows. However, the BOT has succeeded in stabilising the currency by market intervention. In the first eight days of this month, the baht was up only 0.3 per cent, while the Singaporean dollar appreciated 0.5 per cent, the euro 0.6 per cent and the pound sterling 2 per cent.

He said baht stabilisation was aimed at maintaining exporters' competitiveness, and the central bank was encouraging private-sector traders, bankers and producers to react to the currency's volatility on their own account. He insisted that the baht would not fall to the level of 40 to the dollar again.

"They [private-sector operators] know the currency trends well, but the BOT will control baht volatility, so it is less than that in other currencies," said the governor. "They must not daydream that the baht will return to 40 against the greenback again."

He said the managed-float system was aimed at stabilising the baht in a bid to boost the Kingdom's competitiveness without creating obstacles in the long term.

The Thai Bankers' Association, the Federation of Thai Industries and the Thai Chamber of Commerce will meet at the end of this month to discuss measures to counter the baht's appreciation.

The governor said the baht could be stronger or weaker during this second half, depending on the direction of capital movement.

A large amount of capital flooded into the country in the first four months of the year, and then the movement became an outflow. Currently, foreign capital is flowing back into the country.

Bangkok Bank president Chartsiri Sophonpanich said capital movement would not be a concern, because the US Federal Reserve left its policy rate unchanged on Tuesday. Thai market interest rates will rise slightly by the end of the year.

Meanwhile, Pridiyathorn told the BOT's annual symposium that Thailand's economic fundamentals remained strong. The country holds international reserves of US$60 billion (Bt2.26 trillion), three times more than its short-term foreign debts. This is in line with international standards.

Anoma Srisukkasem

The Nation