The rapid outflow of foreign capital has yet to end but the Bank of Thailand will allow the baht to move freely in line with money market mechanisms, BoT deputy governor for monetary stability Pongpen Ruengvirayudh said on Thursday.
Ms Pongpen was responding to the announcement the US Federal Reserve would gradually slow down its quantitative easing measure (QE) later this year and would end it in mid-2014, if the US economy improves.
She said the US Fed’s declaration made its policy clear to the international community, different from its previous uncertain stance on the QE measure.
As a result, it was probable that foreign capital investment earlier placed in the emerging markets, including Thailand, would continue to flow out, she said. This would depend on the economic indicators in the US.
The current capital outflow was not a cause of concern when compared to the recent capital influx and the level of Thailand’s foreign reserves, the deputy BoT chief said.
Ms Pongpen admitted capital outflow would further weaken the value of the Thai currency, but the central bank would allow the baht to move in line with the market mechanism, she said.
If the baht's value drops too rapidly, the central bank would oversee it to prevent a heavy fluctuation in the exchange rate, she said.
A similar situation prevailed with other currencies in the Asian region, and therefore investors dealing with foreign exchange should ensure they have risk management measures in place.
The baht closed at 30.61 baht to the US dollar on Wednesday, but it opened weaker to stand at 31.40 baht on Thursday morning.