Concern for the Thai baht and liquidity if Thailand does not move swiftly to raise interest rates

[webfact]

On Monday last, before Wednesday’s meeting of the Bank of Thailand’s Monetary Policy Committee, the Minister of Finance Arkhom Termpittayapaisith expressed a wish to see Thailand maintain a low-interest-rate environment to encourage the economic recovery. The bank maintained rates at a historic low of 0.5% but concerns are rising of a wider divergence between interest rates in the United States and the kingdom if the Federal Reserve follows through on hawkish signals of a 50 basis point rise in June, July and September. This new challenge comes as Thailand has been experiencing a flight of capital since August 2021. Underlying problems and an unbalanced economy are also contributing to a sluggish economic recovery with the kingdom lagging behind its peers.

 

by Joseph O' Connor

 

Some analysts in the United States suggest that interest rates there could reach 2.7% to 3% by the end of 2022 leading to a wider divergence between interest rates stateside and in Thailand where even if the central bank does raise rates from August, most economists predict that they will only reach 1% by the end of the year, leaving a wider spread, thus encouraging capital flight and further deprecation of the baht.

 

There is rising concern that Thailand’s economy may be caught between rising inflation on one hand which has seen consumer confidence plummet in May and an extended flight of capital out of the country which, despite indicators this week that the Bank of Thailand will begin raising interest rates in from August, may, in fact, be exacerbated further by a more hawkish Federal Reserve in the United States and a widening spread between Thai bank interest rates and not only those stateside but also those within Southeast Asia where countries such as Malaysia have higher rates. This could lead to further depreciation of the baht which has, so far this year, lost 15% of its value against the dollar.

 

The Bank of Thailand at its Monetary Policy Committee meeting this week signalled strongly that it is moving towards a more hawkish monetary policy stance as the seven committee members voted 4-3 to maintain the historically low baseline interest rate at 0.5%.

 

Full story: https://www.thaiexaminer.com/thai-news-foreigners/2022/06/10/concern-for-baht-and-financial-liquidity/

 

-- © Copyright Thai Examiner 2022-06-11

 

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[smedly]

Thailand behind the curve - what's new 

 

 

The most manipulated currency on the planet...........................for who ?

[charmonman]

If they want the international tourism sector to ever recover, a lower baht would not be a bad thing.

[sammieuk1]

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

[barefootbangkok]

A lower baht would also reinvigorate the real estate market.  And the Chinese are just starting to lift their travel curbs.

[ikke1959]

With this Government and policies everything will collapse

[Berkshire]

3 hours ago, smedly said:

Thailand behind the curve - what's new 

 

 

The most manipulated currency on the planet...........................for who ?

Behind the curve?  A weaker baht is a good thing.  As for manipulation....geez man, give it a rest.

[Isaan sailor]

Yeah right—jack up interest rates to pump up the Baht.  That will help tourism and the economy—NOT.

[Swampy999]

15 minutes ago, Berkshire said:

Behind the curve?  A weaker baht is a good thing.  As for manipulation....geez man, give it a rest.

Thailand has been on the US currency manipulation watch list for quite some time, I would assume they understand a lot more about currency manipulation than you ????????

[chilli42]

No need for concern.  The outcomes are very clear.  Increase interest rates or see the Baht devalue …. which will increase the cost of imported goods and elevate inflation.  Japanese Yen a good example of this scenario. Lower interest rates will support a hoped for economic recovery but also elevate inflation. What is difficult is the decision and the choice is between bad and worse.

[garyk]

So basically do nothing at all.  Leave the interest rates low, and let inflation go unchecked.

Curious to see how that plays out.

[10baht]

1 hour ago, charmonman said:

If they want the international tourism sector to ever recover, a lower baht would not be a bad thing.

This correct and the real value of the baht would help - like another 20% decline. It would also help exports. Who cares in a Thai village in the middle of nowhere what the exchange rate is except if it help sell your products over seas. 

[Berkshire]

16 minutes ago, Swampy999 said:

Thailand has been on the US currency manipulation watch list for quite some time, I would assume they understand a lot more about currency manipulation than you ????????

Do you even understand what that means?  It's more to do with Thailand having a trade surplus with the US.  America does not want its trade partners to artificially weaken their currency to gain a trade advantage.  Are you suggesting Thailand is deliberately weakening the THB?  I wish they would...:-)

Edited June 10, 2022 by Berkshire

[Bim Smith]

Raising interest rates will have little to no effect to what's coming. The truth is the debt bubble is way too high for all countries. Interesting to note that Thailand has, since 2019 been building it's foreign currency and gold reserves to an historical high according to World Bank data which is also used as a tool to prop up the value of the baht. It's like they knew they would be closing the country for two years. Where they get the money from to do that is anyone's guess. But this pushing for an interest rate rise will do nothing. The global crash is coming and in my opinion is more by design than some unfortunate accident. Hold on to your hats. And wallets.

[Excel]

On 6/11/2022 at 6:50 AM, Bim Smith said:

Raising interest rates will have little to no effect to what's coming. The truth is the debt bubble is way too high for all countries. Interesting to note that Thailand has, since 2019 been building it's foreign currency and gold reserves to an historical high according to World Bank data which is also used as a tool to prop up the value of the baht. It's like they knew they would be closing the country for two years. Where they get the money from to do that is anyone's guess. But this pushing for an interest rate rise will do nothing. The global crash is coming and in my opinion is more by design than some unfortunate accident. Hold on to your hats. And wallets.

I will be willing to bet that the worlds richest 1% will ultimately benefit even further should there be a global crash

[ezzra]

Look at at Australia now after they have raised the interest rates, inflation, panic  uncertainties and bells ringing all over for those who took max loans to buy a property in the last 2-3 years,

prices of almost everything went up considerably with the warning that interest rates will continue to rise again and again...

[garyk]

9 minutes ago, Excel said:

I will be willing to bet that the worlds richest 1% will ultimately benefit even further should there be a global crash

That is very true!!!  Recession is basically guaranteed in the US now. The next couple of years are going to be devastating for a lot of people. The market is crashing or resetting. US markets are so overvalued it is insane. Inflation is eating away. I am out of here until it settles down.

Edited June 11, 2022 by garyk

[hotchilli]

1 hour ago, sammieuk1 said:

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

I can remember 65 baht for the pound, and Thailand was packed to the rafters with tourists.

[Excel]

2 minutes ago, hotchilli said:

I can remember 65 baht for the pound, and Thailand was packed to the rafters with tourists.

And now it is only packed with Indians searching for the gold necklaces they lost????  And of course searching for a pen so that they can fill  in their insurance claim forms ????

Edited June 11, 2022 by Excel

[Gecko123]

57 minutes ago, Isaan sailor said:

Yeah right—jack up interest rates to pump up the Baht.  That will help tourism and the economy—NOT.

According to the article they are considering raising interest rates in order to attract (or at least stem the exodus) of foreign capital. As other central banks have raised rates, some of this foreign capital has left Thailand in search of better returns, and Thailand's central bank is starting to worry that this capital flight might cause liquidity problems. I think the interest rate hikes are being contemplated for the purposes of maintaining Thailand's competitiveness in foreign capital markets, not to "jack up" the value of the baht, per se.

Edited June 11, 2022 by Gecko123

[RichardColeman]

1 hour ago, sammieuk1 said:

My concern for the Thai Baht is you never get enough of them for a £ and probably never will again ????

That's not strictly speaking true. You seriously have to watch the baht/£ daily. The problem is that when £ has good news and spikes, it only spikes for say 8 hours, then back to normal or lower, on the other hand when the £ has bad new it tanks against the baht and does not come back after 8 hours, but lingers in the outhouse for days !

[rainham]

I'm no financial expert, but 100bht to the pound makes financial sense to me 

[mikebell]

22 minutes ago, hotchilli said:

I can remember 65 baht for the pound, and Thailand was packed to the rafters with tourists.

'Bought' my house when it was 72 to the pound.

[Orinoco]

28 minutes ago, hotchilli said:

I can remember 65 baht for the pound, and Thailand was packed to the rafters with tourists.

yes, 100 baht,  bar fine and 400 for the night and seconds in the morning.

those were the days. 

[jacko45k]

1 hour ago, Berkshire said:

Behind the curve?  A weaker baht is a good thing.  As for manipulation....geez man, give it a rest.

What, so fuel prices can rise further, impacting on inflation further?

[dpcjsr]

More baht for my buck. Works for me. Sad for Thailand. 

[kingstonkid]

36 minutes ago, garyk said:

That is very true!!!  Recession is basically guaranteed in the US now. The next couple of years are going to be devastating for a lot of people. The market is crashing or resetting. US markets are so overvalued it is insane. Inflation is eating away. I am out of here until it settles down.

Being in Thailand may be the safest thing a person can do right now.   Keeping the baht strong is important to all of us that nuy non thai food or items.

If inflation starts to get felt here and rises in the U.S. it is going to cost us more for those things we like.  If you think a bottle of California red is expensive now just wait.

 

If the baht stays at a relatively strong level Thailand for those that want to travel will still be a good spot to come compared to gong anywhere else.  As Australian prices rise Phuket and many of the island beaches will b e quite affordable.

 

Factories have to buy from other countries, stores have to buy from other countries,  we buy a lot from eBay and other locations.  These prices will rise.  It could mean loss of jobs which again hurts the economy.

 

A little rise would not be bad.  Remember also that while the baht is going to have difficulty so is the Spanish currency so it will be interesting to see how that unfolds 

 

[kingstonkid]

13 minutes ago, Orinoco said:

yes, 100 baht,  bar fine and 400 for the night and seconds in the morning.

those were the days. 

Just a reminder for all my Brit friends

[Onerak]

1 hour ago, Swampy999 said:

Thailand has been on the US currency manipulation watch list for quite some time, I would assume they understand a lot more about currency manipulation than you ????????

Lots of countries are  in currency manipulation watch list, including Germany, Japan, Switzerland, S Korea, Singapore, Italy, etc. but they are not considered currency manipulator yet. The US treasury department puts a trading partner on the watchlist if that country had intervened in the currency market by higher levels than 2% of its GDP over a 12-month period, and had a current account surplus of 2% of GDP and a trade surplus with the US. Currency manipulator watch list is just an early warning system before a country can be labelled as a currency manipulator and that will trigger punitive tariff to US export from the same country. And currency manipulator does not mean Thai baht is strong vis a vis US dollar but the opposite. US wants Baht to be like 25 baht/dollar to facilitate more US exports to Thailand. If Baht becomes 40 baht/dollar, that does not help US export to Thailand. It helps Thailand's export to US creating trade imbalance which US does not want.  
 

Edited June 11, 2022 by Onerak

[Berkshire]

19 minutes ago, jacko45k said:

What, so fuel prices can rise further, impacting on inflation further?

Rising fuel prices is a worldwide phenomenon.  The US has raised interest rates.  Hasn't really helped gas prices, has it?