Businesses must steel themselves for greater exchange rate volatility, says Bank of Thailand governor Tarisa Watanagase.
Local businesses need to prepare for further appreciation of the baht and volatility in exchange rates, she said.
But the central bank will ease regulations to facilitate capital outflows and support the development of instruments to help companies hedge currency risks.
Dr Tarisa, speaking at a briefing on central bank policy for 2010, said regulations would be eased to allow the private sector to increase investment in international financial markets.
Facilitating overseas investment and capital outflows would help reduce pressure on the baht to rise from capital inflows and trade surpluses.
The baht, currently trading near 33 to the US dollar, has gained nearly 1% against the greenback this year and more than 5% since January 2009.
Most analysts expect the US dollar to weaken in the near term due to weaknesses in the US economy.
Dr Tarisa said at the same time Asian economies, including Thailand, would eventually be forced to raise interest rates to help stem inflationary pressures as economic growth continued.
But the central bank would not turn to capital controls as in 2006, she said, adding that regulators today monitored capital flows on a daily basis compared with every week several years ago.
Bangkok Post Breaking News 28/01/2010
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