Baht expected to strengthen by year-end

[webfact]

Baht expected to strengthen by year-end

By   WICHIT CHAITRONG 
THE NATION 

 

Tim

 

THE BAHT is expected to reverse course in the next few months, and the central bank is likely to raise the key interest rate in September, Tim Leelahaphan, an economist at the Standard Chartered Bank Thailand, has forecast.
 

Closely monitored risk factors to the economy include trade tensions and the impact of the boat tragedy in Phuket earlier this month on the tourism industry. 

 

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

The dollar has been boosted recently by the expansion of the US economy and the rate hike by the US Federal Reserve. But large spending and tax cuts by the US government will lead to a larger budget deficit, which would weaken the US government’s financial position, he said.

 

A larger budget deficit would lower confidence in the US dollar causing it to weaken, he predicted.

 

He also predicted that the Bank of Thailand was unlikely to defy the trend of rising interest rates. The central bank’s Monetary Policy Committee recently changed its tone about the policy rate. They have started to discuss rate normalisation after keeping a historically low rate of 1.5 per cent so long, he said.

 

The central bank is likely to raise interest rate twice this year, by 25 basis points each time, to 2 per cent by the end of the year. 

 

Another key reason for the rate hike is that the central bank will choose a gradual rate hike rather than a sharp increase later in order to avoid market jitters, he argued.

 

As the economic growth moves towards a broad-based growth, it could accelerate inflation, he warned.

 

He pointed out that Standard Chartered’s forecast differs from the consensus view that the central bank will keep the policy rate on hold for the rest of the year and will start to raise the rate next year. 

 

Finance Minister Apisak Tantivorawong was also against an early rate hike, as he feared it would adversely affect consumers.

Tim believed that pressure from Apisak would not prevent the central bank from increasing the rate.

 

“Apisak also conceded that it is the responsibility of the central bank regarding interest rate policy,” Tim said.

 

Standard Chartered has forecast economic growth rate of about 4.3 per cent this year, compared with 4.5 per cent projected by the Finance Ministry.

 

Upside risk could be possible if the government makes clear in September about the date of the next general election.

 

The lifting of the political ban will lead to political campaigns across the country and that could boost consumer spending, especially upcountry, he said.

 

He was optimistic that the trade dispute between the United States and China would not get out of hand.

 

He, however, said close monitoring is needed to see how the trade disputes would play out.

 

Some analysts believed that trade tensions could escalate into a full-blown trade war as US President Donald Trump recently made a fresh threat to impose tariffs on Chinese goods worth US$500 billion.

 

The International Monetary Fund has warned that the trade dispute between the US, with major economies China, Europe, Mexico and Canada could slash global economic growth by 0.5 percentage points by 2020. It maintained its global economic growth forecast at 3.9 per cent this year but said trade volume would be less than expected, rising 4.5 per cent against its previous forecast of 4.8 per cent. 

 

Another risk factor is the fallout from the boat tragedy in Phuket on the tourism industry, as more than 40 Chinese tourists lost their lives. 

 

Tim said he did not think it would have a big impact on Chinese tourist arrivals.

 

-- © Copyright The Nation 2018-07-23

[Chris Lawrence]

1 hour ago, webfact said:

Another risk factor is the fallout from the boat tragedy in Phuket on the tourism industry, as more than 40 Chinese tourists lost their lives.

Hog wash. Just fix the code for preservation of life in open or closed waters.

 

Higher baht may damage the economy.

[alant]

wonderful

 

[BestB]

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

[observer90210]

Tourism and the economy are going to suffer in Thailand with such choices and so will exports....but good for the neighbouring Vietnam and other countries who will get more tourists.

[ratcatcher]

13 minutes ago, BestB said:

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

At 32.5 baht per $US, the baht has strengthened The $US weakens. At least that's what I understand to be the case and I am not an economist..

[Sir Dude]

Hmmm...with the US having a more hawkish stance on interest rates now and their economy chugging along nicely with most economists expecting a couple more US rate rises this year alone...add to that the UK is likely to raise it's once this year too (probably August), along with the EU central bank ending it's stimulus policy slowly, and the EU economy seems to eventually getting it's act back together, the money will likely continue to flow out of places like Thailand (plenty has left recently) to more less risky destinations if the rates start creeping up and that will lead to a stronger dollar probably. Eventually, interest rates in the western economies must rise and it's called "rate normalization" because when the next financial screw-up comes along they need to have room to maneuver and drop rates to cushion any blow and if we are still down at current rates then could spell trouble...not to mention encouraging people to save again is good for governments and the people themselves despite them having wanted us to spend our way out of the previous mess. Having businesses, economies and borrowers getting too used to and dependent on free money is inherently risky in the medium to long term...got to get back to reality. 

Edited July 23, 2018 by Sir Dude

[quadperfect]

Seems to me last time these guys said the bht would drop to 38 against us dollar and it went down to 30 again just after the announcement. So i predict on there prediction a 38 bht by end of year. Since i believe there will be more concequences to the you know what. 

[ratcatcher]

10 minutes ago, quadperfect said:

Seems to me last time these guys said the bht would drop to 38 against us dollar and it went down to 30 again just after the announcement. So i predict on there prediction a 38 bht by end of year. Since i believe there will be more concequences to the you know what. 

So, are you predicting a weaker baht at 38 per $US ?

[edwinchester]

"The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said."

 

Who on earth writes this crap?

[ratcatcher]

4 minutes ago, edwinchester said:

"The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said."

 

Who on earth writes this crap?

Why  is it crap?

 

 

[Srikcir]

1 hour ago, ratcatcher said:

At 32.5 baht per $US, the baht has strengthened The $US weakens. At least that's what I understand to be the case and I am not an economist..

Isn't it the less baht per dollar means strengthening (the dollar buys less) and the more baht to the dollar means weakening (the dollar buys more)? For example, if the baht was on parity with the USD (1 baht = 1 USD) the baht would be very, very strong.

For exports a country doesn't want a strengthening of its currency because as imports to a foreign nation the products become more expensive and presumably less in demand at the retail level.

[mrfill]

2 hours ago, BestB said:

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

Yes, that is strengthening. You need fewer baht to buy dollars as the baht is stronger.

Look at it the other way round - $1000 will only buy 3250 baht instead of 3350 at present.

[CGW]

14 minutes ago, mrfill said:

Look at it the other way round - $1000 will only buy 3250 baht instead of 3350 at present.

I will gladly give you 3,500? ? 

[soalbundy]

14 minutes ago, mrfill said:

Yes, that is strengthening. You need fewer baht to buy dollars as the baht is stronger.

Look at it the other way round - $1000 will only buy 3250 baht instead of 3350 at present.

you missed a zero

[trd]

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.
 
strengthen or weaken? From 33.5 to 32.5

This is correct. If you got 33.5 baht for every one of your dollars before but now you're only getting 32.5 baht for every dollar then you are worse off as a seller of dollars and a buyer of baht. That means the baht has strengthened and the dollar has relatively weakened.

[stud858]

2 hours ago, ratcatcher said:

At 32.5 baht per $US, the baht has strengthened The $US weakens. At least that's what I understand to be the case and I am not an economist..

I  am a genius economist and you are right.  Also the Thai baht will be crashing next year in my expert opinion.

[Arkady]

Luckily for Mr Tim he has at least a 50% chance of his prediction being correct.

[Mickmouse1]

Is he calling for a bhat rush?

Well , as we all know a stronger Baht will have adverse effect on Tourism and Export.However, what is the projection for a stronger Baht, 1 , 2 or 3%? Will a stronger Baht leads to a reduction in the ROI? Will there be any impact on inflation? ?

Edited July 23, 2018 by Mickmouse1
Correction

[quadperfect]

2 hours ago, ratcatcher said:

So, are you predicting a weaker baht at 38 per $US ?

I am predicting the usd to be at 38 bht not 32.5.

Just like i am predicting the wind to be 40 knots and not 30 kilometers on friday.

[bkk6060]

If there is an election and blood on the streets, expect it to weaken big time.

But, I actually do not think will will be an election.  Maybe never.

[upu2]

4 hours ago, BestB said:

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

Strengthen. The other way around would be to weaken

[Antonymous]

I have to buy a big chunk of GBP with baht before the end of this year and am waiting for the THB to strengthen before I do, so that I will save money. Hope he's right.

 

Meanwhile, for anyone bringing in pensions to exchange into baht, you'll be hoping he is wrong.

 

Here's the USD chart for the past 12 months, to put his prediction into perspective:.

 

 

[CGW]

31 minutes ago, bkk6060 said:

If there is an election and blood on the streets, expect it to weaken big time.

It never has in the past, what would be different this time?

[overherebc]

In international currency markets how big a part does the Thai baht play?

Just askin'

[Sir Dude]

On reflection...this guy is probably not allowed to release the truth, only that his parameters are between OK and wonderful.

[timendres]

5 hours ago, overherebc said:

In international currency markets how big a part does the Thai baht play?

Just askin'

It does not even register:

 

[Curmudgeon1]

16 hours ago, BestB said:

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

Strengthen.. cost of usd cheaper their baht stronger 

[lannarebirth]

The 200 week ma for the $USD : THB is at 33.96. That will stop the Baht's weakening.

[ikke]

17 hours ago, BestB said:

The baht would strengthen to Bt32.5 per US dollar from the current level of Bt33.5 per dollar by the end of the year, he said.

 

strengthen or weaken? From 33.5 to 32.5

Indeed strengthen if from 33.5 to 32.5...... why the question ?