Fears for the baht as it hits a 15-year low and Thai economic performance in the medium term

[webfact]

Last week, the Minister of Finance, Arkhom Termpittayapaisith, asked the Bank of Thailand to soften its plans to raise borrowing rates so as not to impede the economic recovery. However, Thailand appears poised to only raise interest rates from 0.5% to 1% by the end of the year while there is evidence to show that the widening of the interest rate divergence between the US and Thailand in June at 1.25% was a decisive factor in the precipitous fall in the baht by 4%this month with fears that the divergence may widen further to at least 2.75% by the end of the year despite two probable rate hikes here.

 

by Joseph O' Connor

 

While the kingdom maintains a strong external financial situation and prudent fiscal management to support its economy, the growing impact of chronic problems such as household debt and a rapidly ageing population as well as inequality and political instability are undermining any prospect of decisive action to find a solution. The result is an economy that has now performed below its regional peers for years and one that, in the short term, faces a need to more rapidly raise bank interest rates to halt a decline in the baht. 

 

The Thai baht, this week, reached a 15-year low against the US dollar with local analysts predicting that it will breach the ฿36 barrier against the US currency. They project, at the same time, that it will rebound later this year with rising foreign tourist numbers. However, there is growing concern that a widening divergence between US interest rates may be the real cause of June’s 4% drop in the baht and a projected even further widening of the rate difference could see the Thai currency falling even further.

 

It comes in a week when Fitch Ratings, the American credit rating agency, rated the kingdom’s borrowings at BBB+ and gave the country’s economy a stable outlook due to its robust external financial position. However, it warned that Thailand faces significant problems in the medium term with an ageing population, a record level of household debt and ongoing political instability. These issues are believed to be the underlying reason for the kingdom’s lacklustre economic performance since 2018 which, because of the pandemic crisis, has seen the country’s growth stalled since then as its peers in Asia and Southeast Asia move forward.

 

Full story: https://www.thaiexaminer.com/thai-news-foreigners/2022/06/26/fears-for-the-baht-as-it-hits-a-15-year-low/

 

-- © Copyright Thai Examiner 2022-06-27

 

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[FalangKino]

The baht is extremely overvalued 

[alex8912]

This piece of &@$? article just said the baht should get stronger when more tourists come at the end of the year!!  <deleted>!

[cardinalblue]

International travel to/from Asia is sky high; tourists won’t be coming nor expats going home this summer

[RichardColeman]

Fears for the baht as it hits a 15-year low

 

Really ? The £/baht was higher than currently last week ! Talk about a nonsense headline

[ExpatOilWorker]

2 hours ago, RichardColeman said:

Fears for the baht as it hits a 15-year low

 

Really ? The £/baht was higher than currently last week ! Talk about a nonsense headline

Total garbage article. The baht is not at a 15 years low, it was 36.3 to the US-$ back in October 2015.

[Iamfalang]

I'll say it AGAIN.      

 

Thai Baht will go 50:1 USD.

 

Give it time to get above 40....then the depreciation will accelerate.   50 is a conservative fact.

 

65:1 is possible.       30:1 is impossible.  you understand.  

[jacko45k]

2 hours ago, RichardColeman said:

Fears for the baht as it hits a 15-year low

 

Really ? The £/baht was higher than currently last week ! Talk about a nonsense headline

Why focus on Sterling..... ?

It is a weak currency in a dire political situation and carries massive debt. They just announced 9% inflation there and are heading into widescale strike actions. Third world numbers....

[Pawpcorn]

Scare tactics B S headline, AKA a click bait repetitive topics article, meant to scare who?

 

Current Baht / USD exchange rate matches March 2017, a little over 5 years.

[RichardColeman]

6 minutes ago, jacko45k said:

Why focus on Sterling..... ?

Because I send £'s from the UK, not Zimbawe Dollars or Peruvian Sol !!

[sandrew33]

Extremely narrow focus of Baht v USD. 
 

AUD was almost 33 Baht a decade ago it’s now 25 baht. 

 

Perhaps remove the focus on USD and take a bigger picture view? 

[jacko45k]

3 minutes ago, RichardColeman said:

Because I send £'s from the UK, not Zimbawe Dollars or Peruvian Sol !!

Then you are missing a few shillings if you think that reflects solely baht performance. 

Edited June 26, 2022 by jacko45k

[sandrew33]

11 minutes ago, jacko45k said:

Why focus on Sterling..... ?

It is a weak currency in a dire political situation and carries massive debt. They just announced 9% inflation there and are heading into widescale strike actions. Third world numbers....

AUD then. 
 

I think the point is focusing on USD only is simplistic AND asserting that being relatively weaker against that currency is automatically a bad thing is also simplistic. 

[Iamfalang]

12 minutes ago, sandrew33 said:

Perhaps remove the focus on USD and take a bigger picture view? 

I agree, but who has time to focus on everything.  USD is where it's at. 

 

More than 65 countries peg their currencies to the U.S. dollar while five U.S. territories and eleven foreign nations use it as their official currency of exchange.

 

------------------------

 

Even in China.....OMG they love the USD.  Most debt must be converted into USD first.  

 

USD is the life blood of the galaxy.   But I agree, focus on other countries if you have time.  

[10baht]

3 hours ago, webfact said:

The Thai baht, this week, reached a 15-year low against the US dollar with local analysts predicting that it will breach the ฿36 barrier against the US currency.

Good for everything, tourism, exports, russians . Oh no, sorry.

[ThailandRyan]

3 hours ago, webfact said:

The Thai baht, this week, reached a 15-year low against the US dollar with local analysts predicting that it will breach the ฿36 barrier against the US currency

35.46 Thb to $1 this morning, not sure why it dropped, but lets see what happens when the banks open.  Waiting on 36 to transfer a chunk needed for a purchase.

[blazes]

Best to take advantage of US$ strength in the next 12 months or so.  As long as Powell raises rates, all will be well for those of us who want a weaker baht.

 

But when US rates level off or (worse) float back down as Wall Street cries out for help, so will the exchange rate dollar/baht return to unfavourable (for us expats).

 

Question is: does Powell have the balls to firmly overcome the present negative rates? 

US 10 yr at ~3.15.

Inflation at 8.1%

 

[ThailandRyan]

21 minutes ago, blazes said:

Best to take advantage of US$ strength in the next 12 months or so.  As long as Powell raises rates, all will be well for those of us who want a weaker baht.

 

But when US rates level off or (worse) float back down as Wall Street cries out for help, so will the exchange rate dollar/baht return to unfavourable (for us expats).

 

Question is: does Powell have the balls to firmly overcome the present negative rates? 

US 10 yr at ~3.15.

Inflation at 8.1%

 

That's a reason to play the FX game and transfer as it rises and then transfer back as it descends.  

[TigerandDog]

1 hour ago, sandrew33 said:

Extremely narrow focus of Baht v USD. 
 

AUD was almost 33 Baht a decade ago it’s now 25 baht. 

 

Perhaps remove the focus on USD and take a bigger picture view? 

check that rate again. It's been below 25. ( low to mid 24's) for the last month or so. Even though the AUD is not that strong against the USD, it seems to be the only currency that the baht is getting stronger against.

 

 

[KhunBENQ]

And Baht still not weak enough compared to the madhouse Euro.

37.4 would have sound like a nightmare when I left Euroland.

Edited June 27, 2022 by KhunBENQ

[jacko45k]

Just now, KhunBENQ said:

And Baht still not weak enough against the madhouse Euro.

37.4 would have been a nightmare when I left Euroland.

Heck, some us left home with stars in our eyes..... mine was 50B/£ minimum and 5% lowest interest rate!

[vandeventer]

2 hours ago, RichardColeman said:

Fears for the baht as it hits a 15-year low

 

Really ? The £/baht was higher than currently last week ! Talk about a nonsense headline

With the prices going higher and the Baht going lower this will have a huge effect on the Thai people that don't get a cost of living  increases in pay. example, I get a cost of living increase twice a year on my pension.

[Cake Monster]

3 hours ago, webfact said:

It comes in a week when Fitch Ratings, the American credit rating agency, rated the kingdom’s borrowings at BBB+ and gave the country’s economy a stable outlook due to its robust external financial position. However, it warned that Thailand faces significant problems in the medium term with an ageing population, a record level of household debt and ongoing political instability. These issues are believed to be the underlying reason for the kingdom’s lacklustre economic performance since 2018 which, because of the pandemic crisis, has seen the country’s growth stalled since then as its peers in Asia and Southeast Asia move forward.

The record amount of Household Debt is the major reason for no Interest Rate rises within the Country to help control Inflation.

Raising the Interest Rates would tip many Business and Private Households into Debt default, causing a rethink from the Credit Agencies about the Countries stability.

Any lowering of the credit ratings would incur higher borrowing costs for the Government on such things as Submarines and Aircraft. and would throw the Property Market into a Tail Spin.

Stagflation is a very real risk for the Kingdom now.

[Lemsta69]

1 hour ago, sandrew33 said:

Extremely narrow focus of Baht v USD. 
 

AUD was almost 33 Baht a decade ago it’s now 25 baht. 

 

Perhaps remove the focus on USD and take a bigger picture view? 

I don't think anyone really cares about the Pacific Peso except Strayans.

[NorthernRyland]

4 hours ago, webfact said:

the growing impact of chronic problems such as household debt and a rapidly ageing population

Considering the current situation in the US I looked last night if abortion was legal in Thailand and I found it was just made legal in 2021. Honestly I'm surprised the current government would allow this now when birth rates are falling and age is rising.

 

Land feels overpriced in Thailand so maybe population is too high but governments tend to look at the new people as new tax payers so again the timing of this law change is curious.

[smedly]

1 hour ago, sandrew33 said:

Extremely narrow focus of Baht v USD. 
 

AUD was almost 33 Baht a decade ago it’s now 25 baht. 

 

Perhaps remove the focus on USD and take a bigger picture view? 

exactly

[ThailandRyan]

36 minutes ago, vandeventer said:

With the prices going higher and the Baht going lower this will have a huge effect on the Thai people that don't get a cost of living  increases in pay. example, I get a cost of living increase twice a year on my pension.

We went and did our monthly shopping yesterday to restock the pantry, the refrigerator and the freezer.  Same exact items with no difference between last month and this month and the bill was a little over 2k Thb more.  Rice prices are up, prices on international items are up, Meat prices up, and then so are prices on other necessities.  In essence I am still ahead of the inflation with the USD to THB exchange rates.  Should the dollar fall back into the 31 range then I would be loosing to inflation.  Since the beginning of the year the increase has risen to a lttle over 3k from what we spent.  Power prices have increased for electricity, and then fuel costs for driving.  The Thai public must be having a hell of a time and so must the expats who live on there bottom dollars/euros, or such.....

Edited June 27, 2022 by ThailandRyan

[brianthainess]

40 minutes ago, jacko45k said:

Heck, some us left home with stars in our eyes..... mine was 50B/£ minimum and 5% lowest interest rate!

I left OZ when the AUD was Higher than the USD ????

[kevin612]

The baht was strong for many years, let it weaken for one year.  Why the heck this dude want baht stay strong forever.

[ThailandRyan]

1 minute ago, kevin612 said:

The baht was strong for many years, let it weaken for one year.  Why the heck this dude want baht stay strong forever.

I agree, just watching the TNN Business channel and they expect the Baht to regain strength by the 2nd quarter of next year and be between 30.5 and 31 to the USD.