Capital flows remain unpredictable and will depend on the much-awaited stimulus stance of the US Federal Open Market Committee (FOMC), says a senior Bank of Thailand official.
Pongpen Ruengvirayudh, the deputy governor overseeing monetary stability, said the central bank is monitoring capital flows closely, as foreign capital continues to flow into Thai financial markets on a small scale.
"The Monetary Policy Committee does not plan to call a special meeting on the tapering prospect of the US Federal Reserve's monetary stimulus programme as the committee is waiting for its decision," she said. "Capital flows will depend on the outcome of the FOMC meeting since financial markets are anticipating details."
Fed chairman Ben Bernanke will address the media tomorrow after the meeting.
Flows of capital can be either inbound or outbound depending on different scenarios implemented by the Fed, and the outcome will affect investors' confidence in the US economic recovery, said Mrs Pongpen.
Capital outflows will not intensify if the Fed starts scaling back its US$85-billion monthly asset purchases by $10-15 billion, as such a move would be in line with expectations.
The central bank expects the Fed to narrow its quantitative easing to be in accordance with expectations, and capital flows in the global financial markets are not expected to be volatile, Mrs Pongpen said.
She said the central bank still sees movement of capital entering and exiting Thai financial markets every day, as investors are buying and selling both the US dollar and the baht.
Sales of the dollar for the baht are at a minimal level, said Mrs Pongpen.
The baht yesterday weakened slightly to 31.72-31.75 to the dollar from 31.68-31.71 on Monday as investors accumulated the dollar ahead of the meeting.
Mrs Pongpen said further baht appreciation will depend on the movement of short-term capital as well as the timing and amount of the Fed's reduction.
Bank of Thailand governor Prasarn Trairatvorakul said the impact from the Fed's stimulus tapering will be limited, as the cut has been anticipated.
Charamporn Jotikasthira, president of the Stock Exchange of Thailand, said the impact from the Fed's stimulus curb will be minimal compared with the first signal in May, as this has largely been discounted.
About the author
Writer: Pathom Sangwongwanich & Nuntawun Polkuamdee