Thai Baht weakens as government pushes for lower rates

[snoop1130]

 

The Thai baht has started to lose value this month, leading to speculation that its recent rally could be losing momentum. This comes as conflict increases between Thailand's government and its central bank.

 

In October, the Baht weakened 2.7% against the US dollar. This came after it had its best quarter since the Asian Financial Crisis. Mizuho Bank predicts that by the end of the year, the baht could slide to 33.6 per dollar. Increased pressure from upcoming Bank of Thailand and Federal Reserve policy meets might negatively influence the Baht. By Friday, the currency had dropped to 33.2.

 

Thailand's government is planning to increase the inflation target next year. This could give them more leverage in their push for lower borrowing costs. Prime Minister Srettha Thavisin has been publicly urging the Bank of Thailand (BoT) to reduce rates to stimulate growth. This has been making investors nervous, causing the baht to depreciate further.

 

Despite this pressure, the central bank is expected to keep its rate at 2.5% this week, resisting requests to ease and insisting on making its own decisions free from government interference.

Investors have sold a total of $1.178 billion from Thailand's stock and bond market this month. This move by the government for a higher inflation target of 1.5%-3.5% for 2025 has led to a negative shift in sentiment towards the currency.

 

As the local tourism season approaches its peak months, pressure on the baht could begin easing. Local stimulus measures, like cash handouts, expected to boost economic growth, limit the harm of a slower pace in Federal Reserve rate cuts. Lloyd Chan, a currency strategist at Mufg Bank, anticipates the baht to reach 32.5 per dollar by the end of 2024.

 

However, market concerns remain over the potential erosion of the independence of Thailand's central bank due to government interference.

 

File photo for reference only

 

-- 2024-10-14

 

 

[Tropicalevo]

Prime Minister Srettha Thavisin has been publicly urging the Bank of Thailand (BoT) to reduce rates to stimulate growth.

 

And I thought that he had resigned.

[KhunBENQ]

If the central bank resists the pressure to lower interest why should the Baht weaken which he didn't during the last days.

I find the whole article quite useless and out of time.

[KhunBENQ]

There was a period end of September to first week of October where the Baht slightly dropped. But today is the 14th!

You don't want to see the one year chart.

[hotchilli]

As long as the exchange rate stays reasonable I don't mind.

[crazykopite]

Ive always believed the Thai baht is manipulated and I still have that view one day it’s going to go belly up like it did in the late 90s ! Exports are hurting business as overseas buyers are buying their products in countries that offer a better currency rate . Tourists are getting less baht for their currency and even we expats who’s income is sourced from our own countries have had to tighten out belts when it comes to spending.  I now only go out twice a week it used to be 3 or 4 Thailand has become expensive I sometimes wonder how the normal working Thai manages to get by 

[TroubleandGrumpy]

44 minutes ago, crazykopite said:

Ive always believed the Thai baht is manipulated and I still have that view one day it’s going to go belly up like it did in the late 90s ! Exports are hurting business as overseas buyers are buying their products in countries that offer a better currency rate . Tourists are getting less baht for their currency and even we expats who’s income is sourced from our own countries have had to tighten out belts when it comes to spending.  I now only go out twice a week it used to be 3 or 4 Thailand has become expensive I sometimes wonder how the normal working Thai manages to get by 

I agree - it has been artificially high for a long time, and even more so since the Junta took over in 2014. IMO it is long overdue for a large correction, and that it is due for a big fall. 

 

Currency    Peak>2000    Sept 2015    Sept 2024    Now
USD             45.6                36.3               32.7             33.3
EUR              52.6               40.5               36.1             36.3
YPN              0.40               0.31               0.22             0.22
GBP             75.2                55.1               43.3             43.5
AUD             32.9                25.5               23.2             22.4
 

AUDTHB Australian Dollar Thai Baht - Currency Exchange Rate Live Price Chart (tradingeconomics.com)

(Click on 25Y and that gives you a 25 year summary)

(Enter USDTHB in the search bar above chart - and click on that 25Y comparison.)

 

Certainly it wont go back down to its peak value post 2000, but there is a correction coming and despite the elite/wealthy wanting and pushing it higher by whatever means they can, it is due a big fall - 15-20% I would say.  IMO the longer they delay the fall, the quicker and greater the fall will be. BOT should be managing the decline, rather than holding it back.

 

With regards to 'interference' with the BOT, there is some argument that any Govt should not interfere with the decisions made by the Central Bank. But that only holds water if the Central Bank is not corrupt and being 'manipulated' by others. IMO that is not the case with any Govt organisation in Thailand - and I have no reason to think the BOT is also not being 'encouraged' to do what the wealthy/elite want.  IMO the PM should also take that view, and therefor sack the BOT Board and appoint Members to that position who will 'do as they are told'. I say that because the Govt is accountable to the People and if they get it wrong, and if the economy goes the wrong way, they will be 'punished' by the People. The BOT Board are unaccountable, but I have no confidence that they are not corrupted, or that they are only doing what is best for the People. Certainly the Govt must not interfere on a daily or monthly basis, but if the BOT is directed by the Govt to lower interest rates and to also lower the Baht, then they should comply - their discretion should only be by how much and how quickly.

 

[Tropicalevo]

1 hour ago, crazykopite said:

I sometimes wonder how the normal working Thai manages to get by 

With difficulty.

I am sure that is why more are turning to drugs (mental health is the 'go to' excuse)

More suicides.

More scams and scammers.

More anger.

More load shark defaulters.

People are becoming desperate.