The Bank of Thailand ranks third among Asian central banks due to the sharp increase in its foreign-exchange reserves, up 28.7 per cent last year to US$67 billion (Bt2.4 trillion)

The increase was due the BOT's intervention in foreign-exchange markets to slow the baht's appreciation. $14.9 billion was bought into the reserves, boosting them from $52 billion at the beginning of 2006 to $67 billion.

China's central bank holds first place. Foreign-exchange reserves rose 30.2 per cent after it bought dollars worth the equivalent of Bt320 billion to keep the yuan in its range band. The Indian central bank's reserves rose by 29.2 per cent last year.

The Philippines and Indonesia also actively defended their currencies, and as a result their reserves increased by 24.4 per cent and 22.6 per cent respectively.

The Bank of Japan's international reserves were just 5.7-per-cent higher, while Taiwan's central-bank reserves increased by 5.1 per cent.

Despite the BOT's intervention, it could not fight the market as there was a massive inflow of liquidity into the Kingdom.

About $6.6 billion was recorded in the capital account last year, the second highest in the region after South Korea's $21.7 billion.

BOT Governor Tarisa Watanagase said last week the appreciating baht was mainly caused by high capital inflows.

These had more impact than the current-account surplus of $3.2 billion, she said.

Other regional currencies, however, were stronger due to current-account surpluses instead of high inflows.

For example, Singapore recorded a net outflow of US$17.6 billion in its capital account, while its current account surplus totalled $29.5 billion.

Capital inflow to Thailand was much higher than to other countries as it was a main target for currency speculators.

The inflows in Asian stock markets in January last year rose by 15.3 per cent year on year, while inflows into the Thai market jumped by 37.1 per cent.

Tarisa said the huge amount of inflows into Asia had been caused by global imbalances as investors wanted to seek higher returns in Asian assets as dollar-denominated asset values had declined due to a massive current-account deficit in the United States.

Anoma Srisukkasem

The Nation