Bloomberg News

Thai Central Bank Signals Reduced Investment in Euro Assets

December 16, 2011

(Updates with governor’s comments from second paragraph.)

Dec. 16 (Bloomberg) -- The Bank of Thailand signaled it has sold some euro-area investments as the region struggles to contain a sovereign-debt crisis.

Asked if the central bank has reduced holdings in euro assets, Governor Prasarn Trairatvorakul said “the proportion moves up and down, but over the past year you can guess that we’ve adjusted it down.” Most of the monetary authority’s euro holdings are in bonds, he also told reporters in Bangkok today.

The 17-nation single European currency has slumped almost 8 percent against the dollar in the past six months, undermined by fiscal turmoil that threatens to fracture the monetary union. Greece, Ireland and Portugal have already been forced into bailouts as the crisis extends into a third year.

The Bank of Thailand’s euro investments are mostly in German bonds and it has no exposure to Greek or Italian assets, Prasarn said. As a result, it isn’t concerned about credit risk, he said, without elaborating further.

The threat to the global economy from Europe’s woes and the impact of Thailand’s worst floods in almost 70 years led the central bank to cut its benchmark interest rate on Nov. 30 to 3.25 percent, the first reduction in more than two years.

The current level of borrowing costs is “supportive” of economic expansion, Prasarn said.

“We are monitoring the situation closely to see whether there is any need for further easing,” Prasarn said. “If the economy fails to recover as we expect, we can adjust our policy accordingly.”

Thailand’s baht has weakened about 1.6 percent over the past month against the U.S. dollar. The central bank isn’t concerned about recent falls as they are in line with other Asian currencies, Prasarn said.

--Editors: Sunil Jagtiani, Linus Chua

%THB

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Tony Jordan at tjordan3@bloomberg.net; Stephanie Phang at sphang@bloomberg.net


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