Mixed financial-risk strategies urged

At a seminar on economic trends in the second half of the year, Pakorn Peetathawatchai, executive vice president of the bank's treasury group, said operators needed to choose and combine the appropriate options - such as forward or spot trade - to reduce their losses due to foreign exchange.

"It is difficult to predict the trend for the baht this year because of rapid changes in overall economic factors. However, we expect the exchange rate will stay at 33.50 to 34.50 per dollar to the end of the year," he said.

The baht on Tuesday weakened below 34 per dollar.

He said the baht's value would not be as strong as 32 per dollar because of an outflow from the capital market. Total value of outflowing capital has been more than Bt90 billion since the start of the year, as a result of the US sub-prime mortgage crisis and the country's political turmoil.

He said investment in the real sector next year would not be worse than this year, as investment applications in the first five months fell 17.9 per cent year on year.

Meanwhile, he forecast that the Monetary Policy Committee would lift the interest rate by 25 basis points to 3.75 per cent next Wednesday and would maintain the adjusted interest rate throughout the year on the assumption that oil prices would not rise sharply again.

"We earlier forecast that inflation would be the highest on record in September, but it should be lower due to the government's six [economic stimulus] measures. Hence, the central bank should take a chance on Wednesday to consider increasing the interest rate before inflation becomes softer," Pakorn said.

To maintain commercial banks' financial liquidity, he predicted that the minimum lending rate would increase by 25 basis points in the second half from the current rate of 7.25 per cent, in line with the three-month fixed rate which would surge from 2.375 per cent to 2.875 per cent in the fourth quarter.