Hopes of the Stock Exchange of Thailand and gold dealers of seeing equities and gold settlements on the physical exchange in major currencies, particularly US dollars, are dimming as the Bank of Thailand says it needs time to consider the issue.
The central bank is studying proposals for equities and gold to be settled in major currencies as the move could affect its monetary policy management, said governor Prasarn Trairatvorakul.
Prasarn: Eye on monetary policy
It will take more time to evaluate these proposals and the assessment will not be completed soon, he said.
"We have our own economy and finance, currency and monetary policy, therefore we have to consider how the use of other currencies for settlement would affect Thailand's monetary policy," said Mr Prasarn.
"This issue deals with currency settlement. Quoting a price in US dollars or any other foreign currency is not the point."
Mr Prasarn admitted gold traders and SET officials have discussed the issue with the central bank.
Multi-currency settlement for gold and equities on a spot exchange has been described as a crucial move for the SET to achieve its goal of becoming a regional exchange. Multi-currency settlement would help beef up the SET's competitiveness against its regional peers as it could help to sway foreign investors by helping to mitigate their investment risk from foreign exchange fluctuations. Other stock exchanges in Southeast Asia such as Singapore and Malaysia have allowed multiple currency payments for investors for several years.
Mr Prasarn reiterated that the central bank is looking into the context of foreign currencies and their relationship with the central bank's monetary policy conduct more than concerns about speculation on foreign exchange.
The central bank has effectively absorbed financial institutions' excess liquidity at the end of each day through the benchmark policy interest rate as well as using the baht as an absorbing medium, but the central bank's monetary policy could be affected if foreign currencies are involved with the process of absorbing financial liquidity, he said.
In another development, Mr Prasarn scaled back the market's expectation that a weak oil price would allow the rate-setting panel to lower the benchmark rate. The Monetary Policy Committee (MPC) takes into consideration other factors besides oil price in making their decision on the rate, he said.
If headline inflation is below its inflation target of 2.5% plus or minus 1.5 percentage points, the MPC can provide an explanation and wait for inflation to correct the distortion.