BoT tracking offshore inflows
The Bank of Thailand is still closely monitoring offshore inflows after the baht appreciated to just shy of 34 to the US dollar. The central bank will also hold steady on its tapering measures for short-dated bonds next month.
“The Bank of Thailand will continue to closely monitor capital inflows, especially short-term funds that could be highly volatile and cause the baht to fluctuate accordingly,” said Mathee Supapongse, the deputy governor overseeing monetary stability at the central bank. “The BoT is ready to use the instruments on its menu list to discourage investment or speculation in the short-term.”
The central bank’s bonds are one of the channels that foreign investors are using for investment and speculation, he said.
From May 24-26, the baht gained 0.97% against the US dollar, outpacing regional peers such as the Malaysian ringgit (+0.56%), the South Korean won (+0.54%), the Indian rupee (+0.53%), the Philippine peso (-0.49%), the Singaporean dollar (+0.46%) and the Chinese yuan (+0.41%).
In the same period, currencies such as the Taiwanese dollar and the Indonesian rupiah appreciated slightly at 0.2% and 0.1%, according to central bank data.
The baht yesterday weakened marginally to 34.1 to the greenback from Friday’s 34.04, which was the strongest in 22 months. Exporters are concerned that the stronger baht will stall growth momentum.
Mr Mathee said that in June, the central bank will maintain its bond tapering measures to decrease its outstanding bonds and, in turn, lower the short-term inflow of bonds.
“Recently, the Bank of Thailand cut its short-dated bond issuance to reduce the channel that foreign investors could use for investing in the short-term, making its outstanding short-dated bonds gradually decrease,” he said.
The central bank began decreasing its three- and six-month bond issuance from April through May, cutting the release of each bond type from 40 billion baht a week to 30 billion.
Mr Mathee said that there will be 205 billion baht of the central bank’s three-months bonds and around 166 billion of its sixmonths bonds reaching maturity in June.
He said that by setting the issuance cap for both types of bonds at 30,000 billion baht weekly, making total bond issuance of each type worth 150 billion baht next month, the central bank’s outstanding short-dated bonds will drop by 71 billion baht in June.
Likewise, the measure this month has cut the central bank’s outstanding bonds by 10 billion baht.
Meanwhile, Mr Mathee said that the baht appreciated substantially after the Monetary Policy Committee (MPC) met on May 24.
“The baht’s appreciation was partly due to the MPC’s statement, stating that the committee is satisfied with its recent movements, which were in line with other regional currencies,” he said.