Connect with us

Business

Soaring baht continues to court investors and speculators

Thaiger

Published 

 on 

The Thai baht continues to be the best performing currency in Asia. On a year-on-year basis it has soared more than 8% against the USD and this year reached a six-year high. But the strong currency threatens the country’s exports and tourism, two major drivers of Thailand’s economy.

Thailand continues to have solid economic fundamentals, a high current account surplus and substantial foreign reserves together with a hawkish central bank. All these factors continue to lure capital inflows.

International investors and currency players consider the baht a safe haven among other emerging market currencies due to its stability. So, the baht is likely to retain or increase in value, attracting speculative capital inflows and placing upward pressure on the currency.

The Bank of Thailand (BOT) has limited capabilities to stem enthusiasm for the currency.

In early 2019, the BOT didn’t seem concerned about the Thai baht’s appreciation, as a strong currency can actually benefit Thai importers and those who have foreign currency debts. It can also help improve the country’s terms of trade.

But the baht’s persistent strength and its potential negative impacts on the export-driven Thai economy have since prompted concern.

Exports contracted for a fourth straight month in June and the BOT revised its GDP growth forecast for 2019 downward, from 3.8 to 3.3%.

In July 2019, the BOT lowered the cap on the outstanding balance of non-resident accounts by a third and cut its supply of three- and six-month bonds at auctions in July and August. In addition, the BOT has signaled plans to further relax restrictions on outward portfolio investment by Thai investors, which can also help stem currency appreciation.

Then last month the BOT cut the policy rate by 25 basis points from 1.75 to 1.5%, a shift in the BOT policy stance since a raise by 25 basis points in December 2018. But economist believe these measures will do little to quell investment in the baht.

A common belief is that further rate cuts would make the Thai baht less attractive for foreign investors, reducing pressure on the baht. Yet, if the funds flow into Thailand because of the safe haven currency perception, rather than for a high yield, it is unclear whether rate cuts will be effective.

More importantly, easing policy may worsen already elevated household debt, which is 78.6% of GDP (among the highest in Asia), jeopardising Thailand’s financial stability.

The strong baht may just be a product of global trends that are contracting exports, particularly sluggish global growth and trade tensions.

Read the rest of this article at East Asia Forum

 

Want more from the Thaiger family?

📱 Download our app on Android or iOS for instant updates on your mobile
📧 Subscribe to our daily email newsletter
👍 Like/Follow us on Facebook
🔔 Subscribe to or Join our YouTube channel for daily video updates

Leave a comment below or join the discussion on Thaiger Talk Forums.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *



Read more headlines, reports & breaking news in Thailand. Or catch up on your Thailand news.

If you have story ideas, a restaurant to review, an event to cover or an issue to discuss, contact The Thaiger editorial staff.

Follow Thaiger by email:

Tourism2 mins ago

Pattaya October reopening hampered by obstacles

Coronavirus (Covid-19)30 mins ago

Thong Lor again: 31 arrested in club violating Covid-19 rules

Coronavirus (Covid-19)2 hours ago

Pfizer vaccine application received, review process begun

Phuket Sandbox July 1st

days
hours
minutes
seconds

Thaiger is getting behind local businesses for the restart of tourism in July - up to 50% discounts across all advertising packages in June!

Sponsored by image

Visa5 hours ago

Covid-19 prevention leads to 14 arrests of longterm overstays

Coronavirus (Covid-19)5 hours ago

Covid UPDATE: 3,277 new infections and 29 deaths, provincial totals

Thailand6 hours ago

Red tape and restrictions suggest a slow Phuket reopening

Phuket6 hours ago

UPDATE: Tourism Minister reportedly says July 1 ‘sandbox’ won’t happen

Tourism6 hours ago

Koh Samui eyes August 1 reopening, “Samui Sealed Route”

Weather8 hours ago

Village need rain? Have you considered a giant penis?

Coronavirus (Covid-19)11 hours ago

Covid UPDATE Saturday: 3,277 new infections and 29 deaths

Coronavirus (Covid-19)22 hours ago

8.3% of Thailand’s 50 million vaccine target reached so far

Coronavirus (Covid-19)23 hours ago

Site launched for June 14 vaccine signup for all foreigners

Coronavirus (Covid-19)1 day ago

Free quarantine accommodation for arriving Thais to be cancelled

Thailand1 day ago

Thailand News Today | Sandbox – bar, clubs closed? Local AZ problems, Sex toy arrest | June 11

Drugs1 day ago

UN report: Changes in Southeast Asia drug trafficking during the pandemic

Thailand3 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism3 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket3 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism4 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand4 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism4 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand5 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand5 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand5 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand5 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand5 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand5 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand5 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand5 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand5 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Trending