Stubbornly strong baht might incite ‘another rate cut’

[snoop1130]

Stubbornly strong baht might incite ‘another rate cut’

By PHUWIT LIMVIPHUWAT
THE NATION

 

 

The recent rate cut by the Bank of Thailand (BOT) has not succeeded in reining in the surging baht, raising the likelihood of another interest rate cut by 0.25 of a percentage point before the year-end, economists predict.

 

While the central bank’s statement on the policy rate reduction did not mention the strength of the baht, economists suspect the baht’s strength and its impact on the Thai economy was a key reason for the Monetary Policy Committee’s decision to lower the key interest rate by 0.25 percentage point -- from 1.75 per cent to 1.50 per cent -- on Wednesday (August 7).

 

The baht has appreciated by 5.5 per cent thus far in 2019 when compared to neighbouring currencies, and the economic impact of the baht’s strength are starting to show in the country’s poor export performance, said Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank (SCB)’s Economic Intelligence Centre.

 

The central bank, he said, takes economic growth into account when considering monetary policy, leading to the lowering of the policy interest rate on August 7.

 

The EIC expects the BOT to reduce interest rate once more in 2019 by 0.25 per cent, taking down the policy interest rate to 1.25 per cent due to economic factors such as the impacts of the US-China trade war which has escalated to a currency war and the delayed government economic stimulus package.

 

The baht was valued at Bt30.77 to the US dollar on August 7 after the interest rate cut, weakening by only Bt0.01 from Bt30.76 per US dollar on August 6, according to the BOT.

 

The effectiveness of the central bank’s past measures to curb the strengthening baht has been unclear, said Tim Leelahaphan, an economist with Standard Chartered Bank.

 

On July 12, the BOT reduced the limits for outstanding balances of non-resident baht accounts (NRBA) and non-resident baht accounts for securities (NRBS) from Bt300 million to Bt200 million per non-resident.

 

Market analysts see this announcement as the central bank’s attempt to reduce speculative capital inflows into Thailand’s economy and keep the baht’s volatility under control.

Since then, the baht has appreciated slightly from Bt30.81 to Bt30.77 per US dollar.

 

These measures may take some time before their impacts on the baht are shown, the StanChart economist said.

 

While the BOT’s measures have not been successful in curbing the baht’s strength, which has been damaging Thai export figures, the measures are meant to keep the baht in check and prevent it from getting stronger than it already is, said Mana Nimitvanich, first vice president of Krungthai Bank’s Global Business Development and Strategy Group.

 

However, despite the measure’s intended impact, Krungthai expects the baht to appreciate even further, predicting the baht will hit Bt30.2 to the US dollar by the year-end.

 

Economists suggest that the key reason for the baht’s strength is largely unaffected by the BOT’s measures, as Thailand’s current account surplus -- valued at 6 per cent of GDP -- leads to a perception among foreign investors of the country being a “safe haven” as an investment destination.

 

Source: https://www.nationthailand.com/business/30374490

 

-- © Copyright The Nation Thailand 2019-08-08

Follow Thaivisa on LINE for breaking Thailand news and visa info

[RotBenz8888]

12 minutes ago, snoop1130 said:

raising the likelihood of another interest rate cut by 0.25 of a percentage point before the year-end, economists predict.

Let me guess, 14 out of 15 economists predicts further rate cuts? ????

[Skeptic7]

Should never have raised last December. Further cut(s) will be necessary. Get to it!

[Isaan sailor]

Evidence mounting now.  Looks more convincing that ChiComs have a deal with BoT to park their recently matured USD Treasuries into short term Thai bonds—aka hot money foreign inflows.   And the flimsy excuse about Thailand record high USD reserves only reinforces this conjecture. And when USD vs Baht goes down—it drags down related western currencies too.  

[racket]

Cutting the interest rates won’t help, they need to flood the market with more bahts, but then runs the risk of bad debts. They could otherwise purchase more government bonds and perhaps provide incentive for the government to rack up deficits on major construction projects, but since Thailand is dependent on foreign brain to accomplish these tasks would make it more expensive if the bath looses value. It’s a tricky situation. 

 

 

[bangrak]

Just stop all the hypocrisy guys: do it, and again, and again when it needs to, until it has a stable, long-term effect! What you're doing now is oh so obvious: you just attempt to put yourself 'away of the blast', to avoid any responsibility(!) in the catastrophic events unfolding, by yur fault(!): I already see you all declaring to the press: 'We did all we could, to the best of our possibilities, and we could not expect the situation to go that wrong, blah-blah'... You're just like the captain of the Titanic, ...except you know the full story and have watched the movie, so, man up, it's a massive iceberg in front, not the ice cube in your fancy cocktail! For Pete's sake!

[moe666]

Lets see here they only lower the Baht on Friday maybe it will take a few days to see how this is going to work out.

[LazySlipper]

Prayer b4 going to bed:

 

Oh Lord please let the bubble burst so that I might start to live decently on my meager pension. I got no family to go back to and I am getting to old to start sleeping on park benches.