Thai Central bank seeks ways to lift returns

As part of the strategy, the central bank has been diversifying away from the US dollar, which now makes up less than 50 percent of reserves that are approaching US$180 billion.

The central bank also bought nearly 10 tonnes of gold in April to maintain the metal's 3 percent share in its foreign reserve portfolio.

It is also continuing to buy dollars from trade gains and foreign capital inflows. The central bank reported yesterday that its foreign reserves were valued at $187.6 billion as of May 6, compared with $189.9 billion a week earlier.

"Apart from the dollar, yen, euro and pound, we have invested foreign reserves in the Australian dollar and the Swedish and Norwegian krone. We maintain a small amount of them, as they are not very liquid," Dr. Prasarn Trairatvorakul said.

Dr Prasarn said that maximising the returns from foreign reserves was essential as the cost of bond issues to absorb liquidity in the local market is rising. Currency intervention costs have also increased in line with rising local interest rates, said Dr Prasarn.

One option includes establishing a sovereign wealth fund, he said.

"The current law allows us more flexibility in debts that we invest foreign reserves, but we need to think even beyond that," he said.

Asian investment companies make up five of the world's 10 biggest state-owned funds, according to the Sovereign Wealth Fund Institute, as governments seek to improve returns on reserves and other assets.

In the currency market yesterday, the baht gained after Fitch Ratings raised its outlook on Thailand's local-currency credit rating.

The currency rebounded from its biggest one-day decline in four months after Fitch on Thursday lifted its outlook to stable from negative, citing an earlier-than-expected stabilisation in the country's finances.

Foreign investors were net buyers this week of $146 million in Thai stocks through Thursday, according to Stock Exchange of Thailand data.

The baht was trading late yesterday in Bangkok at 30.22/24 to the dollar, compared with 30.31/34 on Thursday.