Thai baht rally faces threats amid political drama and bank policy

[webfact]

Thailand’s recent baht rally faces a rocky road as the country dives into political chaos just before the central bank’s policy meeting this week.

 

Since July, the baht has been a star performer, climbing up the ranks as tourism bounced back from a near two-year low against the US dollar in May. But this impressive upswing could be at risk due to the latest political turmoil.

 

The drama peaked with Paetongtarn Shinawatra clinching the prime minister’s seat, while her predecessor, Srettha Thavisin, was ousted by the court, stated Jeffrey Zhang, emerging markets strategist at Credit Agricole CIB HK Branch.

“We maintain our bearish view on the baht, looking at 36.0 by year-end.

“Thailand’s growth could still struggle to get back to trend, and we see a risk of a lower neutral rate given the long-term structural growth impediments.”

 

Technically, the baht’s recent gains against the dollar appear vulnerable. A momentum indicator shows the currency pair in oversold territory, with some forecasters predicting it could weaken to 37.5 per dollar by year-end. The baht closed at 34.6 yesterday, reported Bangkok Post.

 

Interest rates

 

Traders are now focusing on the Bank of Thailand’s policy decision this week, with expectations that the central bank will maintain interest rates at 2.50%. The narrowing yield differentials between Thailand and the United States, as markets anticipate possible Federal Reserve interest-rate cuts in September, could provide some support for the baht.

 

However, even if the central bank keeps rates unchanged, this may not be sufficient to prevent the baht from weakening in the short term due to ongoing political issues, said Moh Siong Sim, an FX strategist at the Bank of Singapore, who forecasts the currency moving toward 36.0 per dollar by the end of this quarter

“After recent strong gains, the baht could face resistance to additional strengthening. US election risks could see the dollar strengthening back, especially under a Trump 2.0 scenario.”

 

Concerns about Thailand’s high household debt and its investment appeal remain significant for market observers. Paetongtarn, daughter of former leader Thaksin Shinawatra, has been an advocate for lower interest rates and has criticised the central bank as an obstacle to resolving the country’s economic issues.

 

Additionally, reports are suggesting that the new government may abandon a digital cash handout programme, wrote Shreya Sodhani, a regional economist at Barclays, in a client note yesterday, August 18.

“With Paetongtarn securing enough votes for PM, political uncertainty has dissipated for now. We now expect the digital wallet plan to be scrapped, which would imply that the full-year 2025 budget faces some delay.”

 

by Bob Scott 
Picture courtesy of the Thai Embassy

 

Source: The Thaiger 2024-08-19

 

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[CallumWK]

14 minutes ago, webfact said:

Thailand’s recent baht rally faces a rocky road as the country dives into political chaos just before the central bank’s policy meeting this week.

 

Certainly not my observations, since the baht has strengthened against the USD by about 2% since the turmoil started 1 week ago

[CallumWK]

18 minutes ago, webfact said:

US election risks could see the dollar strengthening back, especially under a Trump 2.0 scenario.”

 

I wonder if the writer of this article has even the slightest idea about economics and currency exchange, because everyone knows that Trump favors a weak dollar.

[hotchilli]

The teflon baht will prevail.

[Srikcir]

1 hour ago, webfact said:

US election risks could see the dollar strengthening back, especially under a Trump 2.0 scenario.”

Already under Biden scenario. In 2024:

"The seven major currency pairs dominate approximately 75 percent of all global forex trading. These pairs include EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, USD/CHF, NZD/USD."

No BRIC currencies.

[spidermike007]

I know many of us would like to see the baht drop to about 50 to 1 dollar. For me that feels like what it's worth, when you take into account the drop in exports, the sharp drop in new and used car sales, the drop in the real estate sector, and the drop in foreign investments.

 

Thailand is facing a rocky road ahead, and it's about time the value of the baht  reflected that. 

[jimgilly]

21 hours ago, CallumWK said:

 

I wonder if the writer of this article has even the slightest idea about economics and currency exchange, because everyone knows that Trump favors a weak dollar.

The outcome of the coming US election is up in the air and will be decided by the power elite/technocrats who are the ones actually in charge. 

 

It makes no difference who wins as the objective is to create civil unrest, which among several other events, will lead to the collapse of the country along with a number of other Western countries who are being targetted such as the UK.

 

In this part of the world, Thailand also has significant problems that are becoming more obvious by the day and will not be easily resolved.  Bottom line, it is going to become very difficult in the near future to find a safe haven, if that is even possible to begin with as things get progressively worse worldwide. 

[sscc]

USD is sinking 

[sscc]

In past 30 days, 

USD Vs Baht had dropped 5-6 %,   

USD Vs most others ( Pound, Euro, CAD, AUS )  had dropped 0.8-2.5 %.   

USD Vs RMB lost 1-2% 

USD Vs Sing$ also dropped 2-3%. 

 

One special case is  USD Vs Jap Yen had lost 6-8 % in past 30 days as Japan Government had been selling off Many Billions US Treasury Bonds and converting USD to Yens. 

 

Nevertheless,  Thai Baht  had been strong against all except Jap Yen.