Uncertainty over US rate hike causes concern

[webfact]

Uncertainty over US rate hike causes concern
ERICH PARPART
THE NATION

BANGKOK: -- ECONOMISTS said yesterday that expectations of an early increase in US interest rates might loom larger, while agreeing that Greece and European institutions would eventually find a deal that would keep the Greeks within the euro zone.

Janet Yellen, chairwoman of the US Federal Reserve, will today testify to the US Senate Bank Panel, followed by her testimony to the Financial Services Committee tomorrow.

The UOB Global Economics and Markets Research team said these developments could generate some risk for rate-increase expectations.

Tim Leelahaphan, assistant vice president at the research department of Maybank Kim Eng Securities (Thailand), said Yellen might be more aggressive in her comments this week since she has more and better economic figures to present than what the Federal Open Market Committee (FOMC) had for its economic review last month. These include an improved non-farm payroll in January.

"We will have to wait and see Yellen's comments. Maybank might have to change our house view regarding the US rate increase, which was expected to be in the second half of the year, to midyear instead if her comments are substantially hawkish," he said.

If Yellen is hawkish, it might cause the US dollar to appreciate further and the baht to weaken from the current expected average of 32.5 per dollar during the first three quarters to about 32.6-32.8 during the same period.

The increase in expectations of the US rate increase has reduced expectations for cut in the Bank of Thailand's policy rate.

Maybank has retained the view that the BOT's Monetary Policy Committee will maintain the rate at 2 per cent at its next meeting on March 11, Tim said.

Somchai Amornthum, executive vice president of the research department at Krungthai Asset Management, said the new numbers that Yellen will have with her would reflect the continuing improvement in the US economy, but she would not be fully hawkish in her comments since she has to respect the comments that the FOMC members made last month.

"To reach the market consensus of the US policy rate at 2 per cent at the end of the year, the Fed would have to start increasing the rate at its next meeting. But I do not expect to see that happening, and KTAM still believes that the US will raise its rates in the second half of the year," he said.

As for the Greek situation, Tim expects Athens and its European creditors to come to terms regarding reform measures and the bailout plan, since the European Central Bank (ECB) has toned down its comments and relaxed some austerity measures.

Latest poll

The latest poll has found that most Greeks are in favour of the latest deal between their country and the European Union.

Last Friday, 19 euro-area finance ministers reached an accord to extend the 240-billion-euro (Bt8.9-trillion) bailout for Greece by four months, while Athens has pledged to honour all of its debt by agreeing to a list of reform measures that was submitted to the European Commission yesterday.

The finance ministers will meet again today to discuss Greece's latest response, but the Greek reform measures are still subject to validation by the International Monetary Fund, the ECB and the European Commission - the institutions collectively known as the troika.

Agreement between the two sides has to be reached before the Saturday deadline on the current bailout.

The Greek government will continue wrangling with the EU until the last minute over its debts but it does not matter if Greece leaves the euro zone, said Uwe Parpart, executive managing director and strategist at Reorient Group, an investment firm in Hong Kong.

"We share the assessment of Germany's council of economic 'wise men', who said in a letter published in the German press on February 20 that a Greek exit 'could strengthen the credibility of the current institutional framework and thus strengthen the integrity of the euro area, instead of triggering chaos outside Greece'," he said.

Parpart also expects no economic contagion from the "Grexit" because roughly US$200 billion (Bt6.5 trillion) of Greece's $337 billion in sovereign debt is held by official institutions and the rest is owned by mutual funds and hedge funds.

A Greek default - or conversion of debt into devalued national currency - would entail book losses for official institutions and losses for a handful of mutual funds, so no leverage is attached to this debt and the losses would be trivial relative to overall portfolio size, he said.

Source: http://www.nationmultimedia.com/business/Uncertainty-over-US-rate-hike-causes-concern-30254710.html

-- The Nation 2015-02-24

[i claudius]

In the financial pages today it is saying that rate hikes for the dollor are expected to be pushed back ,when they make these statements do the Thai monetry people ever know what is going on?

[paddyjenkins]

"

"We will have to wait and see Yellen's comments. Maybank might have to change our house view regarding the US rate increase, which was expected to be in the second half of the year, to midyear instead if her comments are substantially hawkish," he said."

I wonder if it would not be easier for Maybank to simply wait until the first rate hike and only then make their forecast for when the first rate hike will be.

[Berkshire]

In the financial pages today it is saying that rate hikes for the dollor are expected to be pushed back ,when they make these statements do the Thai monetry people ever know what is going on?

Did you even read the article? There were no comments from the "BOT's Monetary Policy Committee," only speculation from others involved. How about try to make some sense next time you open your mouth.

[Pib]

When listening to economists half will say "maybe" this, maybe that...and then the other half will say "maybe" that, maybe this. They are all making an educated guess...some will guess right, some will guess wrong. So, so many different things can affect the forex markets. It's almost like guessing "when" will that leaf fall off the tree and when it does "what spot" will it land.

[bassman]

The Thai baht has been close to pegging the US dollar over the last several years. Prior it was based on a basket of currencies. If the US does raise interests rates it will put the BOT in a decision making position of whether or not to continue on the current course. Thailand's economy is more export dependent (plus tourist) than the US so it is a real source of concern here as to the direction of the baht if the USA raises rates, which will raise the dollar's value on international money markets.

[Srikcir]

US rate increases will come sooner than later. The economy is finding growth largely through traditional domestic consumption resulting from cheaper energy, higher employment, and improved redistribution of wealth. However, it can't completely isolate itself from the effects of worsening world economics in Europe.

So a USA rate increase now may be more symbolic as minor increase intended to show resolve for further increases should the economy continue to sustain itself for the next five months. Thailand would benefit as the USA is a major importer of Thai products, if only the Junta scales back its roadmap to isolate the nation politically from the USA.

[Pib]

The Thai baht has been close to pegging the US dollar over the last several years. Prior it was based on a basket of currencies. If the US does raise interests rates it will put the BOT in a decision making position of whether or not to continue on the current course. Thailand's economy is more export dependent (plus tourist) than the US so it is a real source of concern here as to the direction of the baht if the USA raises rates, which will raise the dollar's value on international money markets.

Below is a quote for the Bank of Thailand website regarding it's involvement in managing the exchange rate...I put in bold one statement regarding certain currencies.

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyKnowledge/Pages/ExchangeRate.aspx

Exchange rate and effective exchange rates (NEER&REER)

Since July 1997, Thailand has adopted the managed-float exchange rate regime, which is also consistent with the inflation targeting regime that has been in place since 2000. Under the inflation targeting framework and the managed-float, the value of the baht is allowed to be determined by market forces, reflecting demand and supply for the baht in the foreign exchange market.

Under the managed float, the Bank of Thailand (1) does not target a fixed level for the exchange rate, (2) stands ready to intervene in the case of excess volatility, particularly resulting from speculative capital flows, in a manner consistent with the Bank’s inflation targeting framework.

In some instances, however, supply and demand may be at a disequilibrium, leading to excessive volatility in the value of the baht. The Bank of Thailand aims to ensure that the value of the baht is allowed to fluctuate under the following conditions; (1) the Bank of Thailand stands ready to intervene in the foreign exchange market such that volatility of the exchange rate is at a level that the economy can tolerate, (2) maintaining national competitiveness, as measured through the Nominal Effective Exchange Rate (NEER), which comprises currencies of important trading partners - and not just the US Dollar, and (3) any intervention does not go against economic fundamentals which would otherwise lead to further imbalances.

[Rajhulmaheesh]

US rate increases will come sooner than later. The economy is finding growth largely through traditional domestic consumption resulting from cheaper energy, higher employment, and improved redistribution of wealth. However, it can't completely isolate itself from the effects of worsening world economics in Europe.

So a USA rate increase now may be more symbolic as minor increase intended to show resolve for further increases should the economy continue to sustain itself for the next five months. Thailand would benefit as the USA is a major importer of Thai products, if only the Junta scales back its roadmap to isolate the nation politically from the USA.

Growth? If there werent a communist leader growth should be in excess of 5% plus a year now.

[Rajhulmaheesh]

US rate increases will come sooner than later. The economy is finding growth largely through traditional domestic consumption resulting from cheaper energy, higher employment, and improved redistribution of wealth. However, it can't completely isolate itself from the effects of worsening world economics in Europe.

So a USA rate increase now may be more symbolic as minor increase intended to show resolve for further increases should the economy continue to sustain itself for the next five months. Thailand would benefit as the USA is a major importer of Thai products, if only the Junta scales back its roadmap to isolate the nation politically from the USA.

Growth? If there werent a communist leader growth should be in excess of 5% plus a year now.

[WheresWaldo]

In the financial pages today it is saying that rate hikes for the dollor are expected to be pushed back ,when they make these statements do the Thai monetry people ever know what is going on?

Did you even read the article? There were no comments from the "BOT's Monetary Policy Committee," only speculation from others involved. How about try to make some sense next time you open your mouth.

Why are you such a rude bastard??? Why is this necessary? Why don't you crawl back into your hole and stay there.

[WheresWaldo]

In the financial pages today it is saying that rate hikes for the dollor are expected to be pushed back ,when they make these statements do the Thai monetry people ever know what is going on?

Did you even read the article? There were no comments from the "BOT's Monetary Policy Committee," only speculation from others involved. How about try to make some sense next time you open your mouth.

Why are you such a rude bastard??? Why is this necessary? Why don't you crawl back into your hole and stay there.

[Berkshire]

In the financial pages today it is saying that rate hikes for the dollor are expected to be pushed back ,when they make these statements do the Thai monetry people ever know what is going on?

Did you even read the article? There were no comments from the "BOT's Monetary Policy Committee," only speculation from others involved. How about try to make some sense next time you open your mouth.

Why are you such a rude bastard??? Why is this necessary? Why don't you crawl back into your hole and stay there.

Perhaps you can explain why you're such an ignorant bastard. Better now? Go find some IQ before you even talk to me.

[connda]

It won't happen.

[gk10002000]

I think all bets are off in the near term with this Junta administration. They might be in office for a while and they might just sack the treasury and not do anything rationale with large scale or international finances. I am far from a Macro Economic expert.