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THB Currency | Interest Rates 2022 | 2023

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  • THB Currency | Interest Rates 2022 | 2023

    THB to continue dropping against the USD

    The Thai Baht is forecast to droop to a 4-year low over the next trading week, and its largest monthly currency drop for over 20 years. The Baht’s challenges shadow US dollar gains over concerns about the US Fed’s (US Federal Reserve) ‘tapering’ plans as it reins in enthusiastic stimulus of the US economy. Thailand’s Baht has been the region’s worst-performing currency over 2021, dropping over 11% in value against the USD. The US dollar is now close to a one-year high as investors worry that the US Fed could start pushing up interest rates during the next 12 months.

    For its part, the Bank of Thailand has responded this week by leaving its policy rate unchanged despite Thailand’s tourism-dependant economy being ravaged by the government’s closed borders. According to Reuters, Thailand’s central bank says its economy remains “extremely fragile” and has a “very limited capacity to withstand further shocks due to high external dependence amid the pandemic”.

    Thai tourism authorities are hoping the depressed Baht may help the afflicted local tourist industry and encourage potential tourists to choose Thailand as their next holiday destination. Southeast Asian currencies are now on track for their worst October since March 2020, when the region was still recovering from the 1997 Asian Financial Crisis. Now it’s predicted that the USD will continue to strengthen and push Southeast Asian currencies if the US Fed continues to moderate its pandemic-era spending.

    Asian equities followed the Wall Street lead sharply lower but bonds rallied in end-of-week trading as risk sentiment soured amid growing worries over persistent inflation, even as world markets emerge from the latest surges of Covid-19. Japan’s Nikkei tumbled 2.52% in yesterday’s trading to the lowest level since the start of September, while Australian stocks slumped 2%, South Korea’s Kospi lost 1.50%, and Taiwan’s benchmark dropped 2.2%.

  • #2
    Thai Baht falling over Omicron fears and strong US Dollar

    As the Covid-19 pandemic drags on, it’s not just our patience and our resolve that is weakening. The Thai baht is falling too, weakening against a stronger US dollar and global fears over the impact of the Omicron variant rapidly spreading throughout the world.

    Today the conversion rate stands at 33.59 THB to the US Dollar just off of its peak in December of 33.7. The Thai baht had been slowly gaining ground on the US dollar, as 5 years ago the conversion rate was above 35 THB to the Dollar. At around this time last year in late January the rate had peaked as low as just under 30 THB.

    A market strategist for Krungthai Bank says that Thailand can expect to see its currency fluctuate between 33.45 and 33.65 THB to the dollar throughout the day. The strategist said that the baht is suffering under Covid-19 Omicron uncertainty as well as a US Dollar growing stronger.

    As Thailand takes actions piling on restrictions and delaying any relaxation of Covid-19 rules in the face of the rapidly spreading Omicron variant, investors – and especially foreign investors – are watching the markets like hawks for signs of weakness. After raising the Covid-19 alert level to 4 yesterday, predictions of financial losses and economic downturns could spook foreign investors to pull out of the Thai market, at least in the short term.

    The market strategist said that so far foreign investors haven’t sold out in any major numbers but the market is in a risk-off state, so foreigners may look to sell Thai stocks or reduce assets in the country in the coming days.


    • #3
      Bank of Thailand forecasts lower economic growth during Omicron outbreak

      With the emergence of the Omicron variant in Thailand and an uptick of cases after the New Year holiday, the country’s central bank says the economy might grow slower in the first half of the year. The kingdom has seen a revival in tourism, especially over the past two months with the Test & Go quarantine exemption scheme. Registration for the entry scheme has been closed due to the emergence of the recently-discovered strain, leaving the future of tourism uncertain.

      Along with the tourism rebound, domestic spending has also supported Thailand’s economy. But since the Omicron outbreak, taking a regular at-home Covid-19 test has become the “norm,” restrictions have tightened, and people in close contact with Covid-19 cases have been advised to work at home. The Bank of Thailand said in a statement, which was reported by Reuters, the outbreak is a key risk. The bank says Thailand is expected to control the spread of Omicron by the first quarter of 2022, but the bank’s senior director adds that the outbreak could be more severe and longer than expected.

      As Thailand’s GDP is expected to grow by 3.4% in 2022, households and businesses’ financial stability remained precarious amidst high levels of consumer and corporate debt that were also considered a risk. An associate governor at the central bank says inflation is also expected to rise slightly in the first half of 2022 as targeted, and the bank has been preparing to interfere in markets if the baht currency gets excessively volatile. He adds that the committee will only meet six times a year, or every seven to ten weeks, instead of eight times or every six to eight weeks in the past, due to the market’s burden on the future.


      • #4
        Bank of Thailand to raise interest rates on November 30.2022

        Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput today announced interest rates will be raised on Wednesday to deal with potential inflation increases. Governor Sethaput is expected to raise interest rates by a modest quarter-point to take the benchmark rate to 1.25% underscoring ongoing worries about growth in Southeast Asia’s second-largest economy. Thailand’s economy lagged its Southeast Asia contemporaries and is not expected to return to pre-pandemic levels until early next year when the kingdom’s tourism sector makes a full recovery.

        Governor Sethaput offered some reassuring words before the modest interest rate hike. “It is not necessary to aggressively increase rates to manage inflation like in other countries.” United Overseas Bank economist Enrico Tanuwidjaja says he expects a relatively more modest recovery of the Thai economy and a less aggressive BOT compared to the rest of the major and regional central banks on the back of easing inflation which may result in a rather persistent weakness in the Thai Baht.

        “Negative real interest rates will continue to favour the Thai economic recovery as it diverges away from an ultra-tight monetary policy elsewhere in the world, most notably in the US and Europe.”
        The US Federal Reserve increased rates by 375 basis points so far in this cycle, with 75 basis point moves at the last four meetings and another 50 due in December. The Baht has been one of the top performers in emerging market currencies, depreciating only about 7% so far this year, despite the wide interest rate gap. Australia and New Zealand (ANZ) Banking Group Limited economist Krystal Tan noted that the external pressure on the BOT to be more assertive with rate hikes has also eased after the recent retreat in the dollar.

        “Capital inflows have returned to its domestic bond and equity markets in the month-to-date, and the decline in foreign exchange reserves has started to reverse.”
        A weak currency is generally considered positive for the tourism-dependent Thai economy. Before the Covid-19 pandemic hit Thailand almost three years ago approximately 40 million tourists visited the country. The Thai government believes tourism in 2023 will hit 80% of its pre-pandemic levels, even if global growth slows. The Development Bank of Singapore (DBS) economist Chua Han Teng reckons Thai international tourism arrivals will be resilient to the global economic slowdown, with arrivals showing low sensitivity to global economic activity fluctuations historically. Time will tell if these predictions come true.


        • #5
          Thai baht depreciates against US dollar

          After a recent surge of strength by the Thai Baht earlier this month, it has now depreciated against the US Dollar. As of today, December 16, the baht now stands at about 35 per USD, according to an executive at Kasikorn Research Center, Kanchana Chokpaisarnsilp. On December 16.2022, the baht was at 34.92 per USD, Daily News reported.

          Market strategist Poon Panichphiboon said the US financial market is turning to more risk-off conditions amidst concerns that the Federal Reserve’s rake hike trend.

          According to the latest US economic data, retail sales in November contracted -0.6% from the previous month. This was much worse than expected and has caused concern about the US economic outlook. In European stocks, Europe’s STOXX600 index tumbled -2.85% amid concerns about the prospect of further rate hikes by major central banks. The European Central Bank (ECB) raised its policy deposit facility rate by 0.50% to 2%, signalling that it will continue to raise interest rates until it is confident that it can successfully control inflation.

          The ECB has announced plans to reduce its Balance Sheet Reduction by 15 billion euros per month from next March until the end of the second quarter. Earlier this month, on December 2, the Thai baht had opened at 34.78 against the US dollar. Economic growth this year was expected to be at 3.2%, lower than the prior projection of 3.3%, according to the central bank.

          Thailand’s currency is facing pressure from the depreciating USD, gold sales, and foreign investors possibly buying more Thai bonds amid continuous drops in the US 10-Year bond yields. However, economists had high hopes for the baht in the long run. Capital Market Research Specialist at Kasikorn Bank Kittika Boonsrang predicted that the Thai baht could get to a high of around 33.5 to 34 per USD by the end of next year. Kittika added that the forecast would only be achievable if Thailand pumped up exports and ramped up tourist arrivals.