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| • EXCH RATES |
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Baht/$ 33.08/12
Bid/Ask
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GOLD |
13,650
- 250
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PARISTA YUTHAMANOP
The baht could see increased volatility if Vietnam is forced to devalue the dong, according to Amara Sriphayak, a senior director for the Bank of Thailand.
Any move by Vietnam to adjust its foreign exchange regime could affect investor confidence throughout the region and trigger capital outflows, she said yesterday.
''If the dong is devalued, chances are that we will need to look after the baht so that it is not excessively volatile. Our actions will be based on effective exchange rates,'' Dr Amara said.
The baht closed yesterday at 33.08/12 to the dollar, down slightly from 33.00/05 on Tuesday. The baht has fallen by more than 3% against the dollar this month and less than 1% since the beginning of the year, due largely to an increase in the trade deficit on soaring oil prices and a shift in investor sentiment because of domestic political uncertainties.
Dealers said the central bank was continuing to intervene in the currency markets in an attempt to slow the depreciation of the baht.
The Vietnamese economy, however, is in much more dire straits, given a trade deficit of nearly $15 billion baht for the year to date and the sharp decline in property and equities prices over the past several months.
The central bank in Hanoi has lifted interest rates sharply and imposed curbs on bank lending to help slow economic growth and inflation, which reached 25% year-on-year in May.
Dr Amara said the economic turmoil in Vietnam, particularly its spiralling problems with inflation, offered an important lesson for Thailand about the primacy of focusing on sustainable growth rather than short-term gains.
''Just last year, some analysts noted that Vietnam's economic outlook was more promising than Thailand's more modest growth,'' she said.
''But it's quite proven that high economic growth with 25% inflation is not sustainable. ... Thailand should see this as an example.''
Dr Amara said interest rates should not remain low in light of rising inflationary pressure, as low rates would only offer incentives for investors to shift funds from banks to speculate on stocks and property.
The central bank's Monetary Policy Committee will meet next on July 16. Many expect the committee to raise its one-day repurchase rate by at least a quarter point from 3.25% now to help ward off growing inflationary pressure.
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