More money into Asia, Thai currency to strengthen from QE3+


PRACHUAB KIRIKHAN, Dec 16 – A new round of money to be released by the US into the global economy as part of quantitative easing measures will contribute to successive monetary flow into Asia next year and strengthen Thai currency, according to a senior Bank of Thailand (BoT) official.

Pongpen Ruengvirayudh, BoT deputy governor for monetary stability, said the US Federal Reserve’s QE3+ plan is not unexpected but the money inflow in  Asia will be smaller than in Eastern Europe and Latin America, which offer higher returns.

The US Federal Reserve announced in September this year a third round of quantitative easing, or QE3, which included a plan to purchase US$40 billion of mortgage-backed securities (MBS) per month. QE3 was to no avail, compelling it to add larger amounts of money into the economy.

Ms Pongpen said the Thai currency will be stronger but with minor movements and the BoT will not intervene.

The Thai currency will naturally move in accord with the market mechanism and the BoT has never intervened despite stronger baht in the last several years, she said.

She urged the private sector to be cautious and adopt exchange rate risk prevention, despite the fact that Thailand will be spared from economic impact next year.

Thailand has balanced investment, thanks to its ongoing investments in infrastructure in the state and private sectors, she said.

Foreign investments in the Thai bond market totalled US$10 billion for the first nine months of this year while Malaysia attracted twice more than Thailand, she noted.

She added that the Thai stock market which enjoys a 30 per cent increase this year reported an inflow of US$2 billion in foreign funds.