BOT mulls lower dollar weighting

"We would not change it [the reserve structure] because of the currency trend - by unloading the dollar when it depreciates and

hurrying to buy it when it is stronger," senior director Pongpen Ruengvirayudh said last week.

The remix will be based mainly on economic fundamentals rather than the fluctuating value of the greenback, she said.

The US dollar will be progressively reduced and other currencies increased to fit with Thailand's trading partner structure. The Kingdom's exports to the US have declined, while trade payments in dollar terms have fallen.

The central bank will act in ac-cordance with long-term prospects, not depending on the cycle of the dollar, she emphasised. The dollar trend has only a slight impact on the decision.

The central bank has steadily unweighted the dollar in its foreign reserves since 2002 after it dropped the fixed exchange rate in 1997.

The central bank no longer needs to hold lots of dollars under the current floating exchange rate regime, unlike during the era of the basket of currencies, when it needed to collect dollars in large amounts.

"We'll change it in accordance with the country's economic structure. Don't expect that when the dollar is up, we'll turn back to hold the dollar like we did before," she said.

Earlier, Governor Tarisa Watanagase said the central bank has been steadily dumping the dollar until now it is lower than other central banks' average level of about 60 per cent.

Shipments to the US have slumped from 21 per cent to 17 per cent of the Kingdom's total exports after traders turned to other markets.

Pongpen also said foreign inflows were seen last year, particularly for portfolio investment.

However, demand and supply in the currency market are quite balanced, because importers have bought the dollar for payment, especially for crude oil.

The central bank will step into the foreign-exchange market when it needs to, she said.

Fitch Ratings expects Thailand's international reserves, including gold, to accumulate to US$112 billion (Bt3.6 trillion), equivalent to 6.7 months of current external payments and 42.4 per cent of "broad money" (a measure of the money supply). These ratios are better than the medians of those countries with the same rating of "BBB".

For the first time since 2001, the current-account surplus surged above 5 per cent of GDP in 2007, despite a sharp appreciation of the baht.

This year, Fitch expects a favourable policy environment - such as the lifting of the 30-per-cent unremunerated reserve requirement for capital inflows - to drive up net capital inflows, which will offset an expected reduction of the current-account surplus associated with deteriorating global economic conditions.