. in september, increasing doubts were voiced as to the sustainability of the economic upswing in the us : compared with earlier cycles, the essential element of an improving labour market was missing. this led to a consolidation on the capital markets even though the economic indicators remained largely positive. with the first signs of the us labour market recovering at the end of september, coupled with rapid growth in gross domestic product in the third quarter ( 8. 2 % ), the strength of the economic revival in the us economy was confirmed. just how sustained this pick - up proves to be will become evident in the coming months when the extraordinary fiscal and monetary stimuli weaken. foreign exchange markets fluctuations in the us dollar dominated the foreign exchange markets. after having lost considerable ground during the first half of the year, the greenback rebounded slightly by october amid growing signs of an acceleration of growth. recently, the focus of market participants returned to the sustainability of the us recovery and the continued rise in america ’ s current account deficit. as a result, the dollar weakened again ( see graph 2 ). since the middle of the year, the swiss franc has moved sideways against the euro. heavier fluctuations were recorded vis - a - vis the dollar. with positive economic data emanating in the us from june onwards, the franc initially weakened before firming again as part of the general dollar consolidation witnessed since september. on the whole, the swiss franc hardly registered any independent movements. it depreciated strongly during the first half of the year after our interest rate decision and has remained stable since the summer. in relation both to switzerland ’ s 24 major trading partners and to the euro zone, the real exchange rate index of the swiss franc is now slightly below its level at the beginning of 1999, i. e. at the time of the euro launch. gold market owing to the more favourable economic situation, raw material prices continued the rise which had started in 2001. at over 400 usd / ounce, the gold price was at a seven - year high at the beginning of december. because of the weak dollar, the gold price increase in francs was more modest. however, its peak of approximately 17, 000 chf / kg was still the highest for several years. the main reason for this rise was persistently modest hedging activity by gold producers. equity markets international equity markets exhibited a positive course overall, steadily making up lost ground after their mid - march low ( see graph 3 ). as the equity

tarisa watanagase : dealing with volatile capital flows welcome address by dr tarisa watanagase, governor of the bank of thailand, at the 42nd seacen governors ’ conference, bangkok, 28 july 2007. * * * your excellency minister of finance, mr. rodrigo de rato, mr. herve hannoun, fellow governors, distinguished guests, ladies and gentlemen, i would like to begin by extending a very warm welcome to all of you to bangkok. we are pleased to host the 42nd seacen governors ’ conference and the 26th meeting of seacen board of governors here in bangkok. i would also like to express my sincere appreciation to his excellency chalongphob sussangkarn, finance minister of thailand, for his presence here to officially open the conference. this year ’ s theme on “ living with volatilities : is seacen prepared for rising fluctuations in exchange rate and capital flows? ” comes at an opportune moment, given a recent volatile and uncertain market conditions. this volatility has posed challenges to central banks in maintaining monetary and financial stability. let me share with you some of my views on this very important issue. it is traditionally believed that emerging markets are subject to more volatile capital flows than developed countries due to underdevelopment of our financial markets and weak institutions. thus, putting in place a more flexible exchange rate policy, credible monetary policy and sound domestic financial system could help emerging markets reduce the volatility of capital flows as well as its negative effect on the economic stability. the asian financial crisis in 1997 taught us a number of painful lessons from volatile capital flows associated with such weak institutions. since then, we have seen a large number of developing countries moving towards flexible exchange rate regime, adopting inflationtargeting framework, and improving the resilience of financial system. yet, the challenges from volatile capital flows have become more intensified and we still see the implications of volatile capital flows on our economies. we are, therefore, very fortunate to have with us mr. rodrigo de rato, managing director of the imf, and mr. herve hannoun, deputy general manager of the bis, to share their views and insight on this issue. i believe that we can greatly benefit from the imf ’ s new surveillance framework, which put greater emphasis on the volatile financial market, as well as from the bis expertise on analysis of capital flows during the morning session. i am certain that