Thai baht expected to short-term weaken

A report released on Saturday by the Thai Finance Ministry's Fiscal Policy Office said that the Thai baht is expected to weaken for a short term if Japanese and European central banks hike their interest rates.

The report was quoted by the Thai News Agency as saying that there were signs the Japanese and European central banks will raise their interest rates while the United States' Federal Reserve would maintain its rates at least during the first half of this year and this would help the baht, which has been strengthening steadily against the U.S. dollar, from rallying at least in short-term.

The baht closed at around 34.89 against the greenback on Friday, unchanged from Thursday. The baht has jumped nearly 12 percent over the past year, causing concerns that the strengthening could hurt the country's exports.

According to the report, local interest rates which could help stimulate investment should be at around 3.75-4.25 percent as the Bank of Thailand is due to discuss lowering its interest rate. The Finance Ministry will hold a meeting later after knowing the direction of rates in the country.

Finance Minister Chalongphob Sussangkarn has said that his ministry would not intervene in the central bank decision on interest rate and that it would coordinate monetary and fiscal policies in an attempt to boost Thailand's economic growth to achieve the target at 4.5 percent in 2007.

Source: Xinhua