BOT remains cautious on foreign exchange

Suchada Kirakul, assistant governor for the Financial Markets Operations Group, said the managed currency policy remains in place as spending is weak despite government activity. However, the policy is implemented in a cautious manner, to prevent unnecessary cost.

She insisted that though the baht has strengthened 4 per cent against the US dollar since early this year, the currency remains close to those of trade competitors which confirmed exporters' competitiveness. Due to lower volatility, at present, exporters are hedging 30 per cent of their income and importers 20 per cent, against 50 per cent in the previous year.

"The baht is naturally volatile, but the central bank needs to help smooth business operations. Yet, exporters and importers also need to help themselves," she said.

Operators now diversify risks through more payments in various currencies which reduces dollar-denominated volume from 90 per cent of total value to 80.7 per cent in late 2008.

She insisted Thailand's financial stability remains strong, with foreign reserves as high as US$135.3 billion(Bt4.5 trillion). The level of reserves however depends on the Thai economy's resilience to exchange volatility and outflows, she added.