The Bank of Thailand may consider additional measures to curb baht speculation after occasional increases in the volume of foreign exchange transactions have been detected, says a senior official at the central bank.
Vachira: Monitoring non-resident activity
"The Bank of Thailand requires commercial banks to provide additional information in the event of unusually high volume of transfers between non-resident baht accounts, which may relate to baht speculation," said Vachira Arromdee, assistant governor of the financial markets operations group.
The central bank has monitored baht transactions of non-residents and found that the balance of non-resident baht accounts and transactions between these accounts has irregularly increased, she said.
Ms Vachira said the appreciation of the baht of more than 7% since the beginning of this year has been mainly caused by the depreciation of the US dollar and Thailand's improved economic state.
"However, the financial market has become more volatile due to external factors, specifically geopolitical risk and political issues in the US," she said. "Thus, some market players might have used this opportunity to speculate in regional currencies, which exerted pressure on the baht."
The baht is the top-performing currency in Asia for the year to date, rising more than 7%, while South Korea's won and the Taiwanese dollar have surged about 6%. Shortly after the central bank's verbal intervention, the baht fell to 33.24 to the dollar yesterday from 33.22 on Friday.
Apart from the US dollar's retreat, Thailand's safe-haven status and hefty current account surplus of more than 800 billion baht in the first half attracted offshore fund flows. Foreign investors were net buyers of more than 120 billion baht in Thai bonds and an additional 2.23 billion in the equity market.
The central bank has kept its tapering measures for almost five months, cutting supply of short-dated bonds by 400 billion baht as it seeks to curb hot money.
The 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.
Central bank governor Veerathai Santiprabhob said earlier that the cut in bond issuance was only one of the central bank's tools available to curb speculation.