Strong Thai Baht Still In The Pipeline

[george]

Strong Thai baht still in the pipeline

BANGKOK: -- Several weeks ago the baht finally broke through the critical level of 34.00 per dollar for the first time in months, but quickly fell back to 33.5 within two weeks. There are two main reasons for this movement.

First, as mentioned many times in previous issues, the baht has been too static against the dollar and some other curฌrencies. A less volatile currency benefits both exporters and importers, but being too static is not always good. Eventually the currency needs rebalancing, but that may hurt some exporters.

Second, the country is still recording huge money inflows via the current account balance, even though the economy itself is still struggling to get back on track.

Looking ahead, a much more challenging path for everyone with foreign exchange exposure in this market lies ahead. During the past month, many analysts became more bullish on emerging markets, including Asian countries. Some argued that while there were some encouraging signs of recovery in the developed countries, the real economic action was actually taking place elsewhere.

Emerging countries are set to dominate global economy activity in the years ahead as many developed countries are held back by their enormous debt. This situation is also influencing the currency market as it sets the course of capital flight in the world's financial markets.

We have been witnessing capital inflow into our region, including our country, for many months, which is one reason for the bullishness in emerging countries among investors.

The other reason is interest rate differentials, which will be a key driver next year. Recent FX normalisation reflects interest rate differentials as well as economic fundamentals. A zero rate monetary policy in the US is becoming an increasingly dominant driver of currencies, especially Asian currencies. With the Fed now expected to remain on hold throughout next year and even until 2011, there will be more capital outflow from dollar assets, and this will probably benefit all emerging curฌrencies, including those in Asia.

Asian currencies will likely become stronger than the current level, especially when Asian central banks start to raise rates independently from the Fed next year.

This situation also holds true for Thailand. We expect that by the end of next year the Bank of Thailand will raise its key interest rate by at least 50 basis points, and the economy will be back on track at pre-crisis levels.

With limited capital outflows, capฌital inflows (causing a current account surplus) will continue to put upward pressure on the baht. The baht is still under pressure against the dollar and is expected to appreciate further through 2010.

Nattawut Sachabudhawong is a senior financial economist in the treasury division of Siam Commercial Bank.

-- The Nation 2009-10-06

[bangon04]

Strong Thai baht still in the pipeline

We expect that by the end of next year the Bank of Thailand will raise its key interest rate by at least 50 basis points, and the economy will be back on track at pre-crisis levels.

Nattawut Sachabudhawong is a senior financial economist in the treasury division of Siam Commercial Bank.

-- The Nation 2009-10-06

So we can count on this, coming from an expert....and reported in the Nation, no less.

[bkkjames]

hmm, BOT to raise interest rates by 50 basis points by year end. Why? To protect against the anticipated inflation? Ok if true. But on the other hand if the baht continues to strengthen, the demand for our exports will still be in tough times and the costliness of travelling here will get even higher.

Economy returning to pre-crisis levels, not anytime soon me thinks.

[007]

We have been witnessing capital inflow into our region, including our country, for many months, which is one reason for the bullishness in emerging countries among investors.

With the prime minister publicly telling people not to travel overseas (to save baht), and diminishing imports, on the one hand, and more and more transfers of funds to Thailand by morons, who think they can make money at the SET, and rising exports, on the other hand; it's not rocket science to foresee a strong baht in the short and medium term.

[jamieson]

Strong Thai baht still in the pipeline

We expect that by the end of next year the Bank of Thailand will raise its key interest rate by at least 50 basis points, and the economy will be back on track at pre-crisis levels.

Nattawut Sachabudhawong is a senior financial economist in the treasury division of Siam Commercial Bank.

-- The Nation 2009-10-06

So we can count on this, coming from an expert....and reported in the Nation, no less.

with the usa owing big time - 3 ( yes, "three") trillion dollars and with no solution to pay abck anytime now - to the chinese ( who are thinking of dumping the us dollar now )and with asia/pacific countries leading the world out of the present global crisis, one should not count on the us dollar or the euro to be propped up any further after what the lehman brothers and the likes have done to the usa and most western nations who backed the usa banks and stock markets to the hilt during the last round.

the IMF has just released a report yesterday saying the worst is not over and done with.

in brief, the worst is yet to come - and very soon for that matter when the us dollar and the euro will take a dive of sort.

Edited October 6, 2009 by jamieson

[tijnebijn]

Strong Thai baht still in the pipeline

We expect that by the end of next year the Bank of Thailand will raise its key interest rate by at least 50 basis points, and the economy will be back on track at pre-crisis levels.

Nattawut Sachabudhawong is a senior financial economist in the treasury division of Siam Commercial Bank.

-- The Nation 2009-10-06

So we can count on this, coming from an expert....and reported in the Nation, no less.

with the usa owing big time - 3 ( yes, "three") trillion dollars and with no solution to pay abck anytime now - to the chinese ( who are thinking of dumping the us dollar now )and with asia/pacific countries leading the world out of the present global crisis, one should not count on the us dollar or the euro to be propped up any further after what the lehman brothers and the likes have done to the usa and most western nations who backed the usa banks and stock markets to the hilt during the last round.

the IMF has just released a report yesterday saying the worst is not over and done with.

in brief, the worst is yet to come - and very soon for that matter when the us dollar and the euro will take a dive of sort.

Replace the Euro with the Pound and you have an ' already ' true story .

There is no indication that the Euro will decline in the short and/or midterm , should do your homework better ...

But all not least exchange rates , in my opinion , is a lottery anyway , things can change and ex in a minute .

[britmaveric]

Well any news coming from Thailand like this usually means the direct opposite will happen.