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Published on September 26, 2007

However, the baht remains relatively stable, according to the central bank.

Bank of Thailand (BOT) deputy governor Atchana Waiquamdee said yesterday that foreign funds continued to flow in, particularly into the stock market.

The Fed last week aggressively cut its fund rate by 0.5 percentage points to 4.75 per cent. This narrowed the gap between US rate and the BOT policy rate of 3.25 per cent.

Inflows are most visible in net foreign buying on the stock exchange. Since the Fed's rate cut, foreigners have been net buyers of Bt4.52 billion worth of shares.

In addition to portfolio investment, there has been an influx of foreign direct investment. This is attributed to sound economic fundamentals, reflecting insignificant changes in national competitiveness, BOT Governor Tarisa Watanagase said.

"Direct investment inflows continue because the fundamental analysis from the outside still looks good," she said.

This has eased worries over competitiveness. However, some sectors of the economy have lost out to rivals in other countries, she said.

In addition, the bank noted the baht had not appreciated as much as the currencies of some neighbouring countries, in spite of capital inflows.

BOT assistant governor Nitaya Pibulratanagit said the baht had been stable against the greenback in the past few days. The bank's unremunerated reserve requirement has helped slow baht appreciation, she said.

"The withholding reserve requirement has so far limited capital inflows," she said, and would continue to retard appreciation of the currency in the future, she added.

"It does not mean the central bank will maintain this measure forever. We will revoke it at an appropriate time, but not now," Nitaya said.

Central Bank senior director Suchada Kirakul said the baht was stable at present because its earlier appreciation had outstripped that of regional currencies.

Tarisa insisted the BOT would intervene if the foreign exchange market became volatile.

Suchada said the strong baht had helped lessen the impact of soaring crude oil prices and retail petrol prices had not accelera-ted.

Crude prices remain within forecast range, although the bank will review economic assumptions, including oil prices, at the October 10 Monetary Policy Committee meeting.

Anoma Srisukkasem

The Nation