Thai Baht strength

[Riversider]

Can someone explain to me the strength of the Thai Baht. The recent floods have caused untold problems for both Thai and foreign owned companies but the Thai Baht remains unaffected. Economists are forecasting a 1% drop in GDP this year and possibly double that if the floods reach Bangkok. Is the Baht not affected by the same economic rules as other countries.

[hhfarang]

Not just unaffected, it has strengthened by nearly a baht to the dollar in the last week.

[STEVE G]

Here's an article from The Nation:

Market prepared for MPC to hold benchmark steady at 3.50% today

The baht is likely to move in a narrow range in response to market expectations that the Bank of Thailand's Monetary Policy Committee (MPC) will hold the policy rate steady at its meeting today.

"A [rate] pause appears to be the general consensus, and hence market reaction to it may be minimal," Parson Singha, chief market strategist at HSBC Thailand, said yesterday.

The MPC has nudged the policy rate up seven times in a row to 3.50 per cent, after a rate pause a year ago.

Prasarn Trairatvorakul, the central bank's governor, said early this month that monetary policy stood ready to respond if the global economic situation changed and the Thai economy needed stimulus.

The policy rate is widely expected to be left unchanged because of the many risks facing the economy.

"It's likely a choice between a pause and a rate cut. A pause would be viewed as more conservative and responsible, and should be generally more supportive for the baht in the [foreign-exchange] market," Parson said.

"There would probably be more of a reaction if the BOT cut the rate, as some businesses are hoping, and that would likely lead to improved sentiment and risk appetite at least in the short term."

The baht traded at 30.76 per US dollar as of 5.30pm yesterday, compared with 30.60 a day earlier.

Standard Chartered Bank expects the currency to weaken to 32.0 per dollar by the end of this year.

"The baht will likely remain in a two-way direction for the rest of this year and next year due to volatile portfolio flows" in the stock and bond markets, said Usara Wilaipich, StanChart's Bangkok-based senior economist.

The Stock Exchange of Thailand is likely to be volatile after news on the ailing US economy and Europe's struggling sovereign debt crisis unless these problems are solved and Thailand's worst floods in decades that forced a number of temporary plant shutdowns dissipate.

The SET Index yesterday slid 18.88 points, or 1.94 per cent, to 952.75 points on turnover of Bt23.12 billion as concern mounted over the likely deterioration in publicly traded companies' earnings due to the flood crisis.

The equity market is expected to welcome a rate pause in today's MPC meeting as there is a likely change from the previous hawkish tone, said Joanne Goh, regional equity strategist at DBS Bank in Singapore.

"The central bank has also allowed for a greater tolerance on inflation, which means that measures to boost personal consumption can be implemented without markets worrying too much about potential rate hikes," she said.

[johnnyk]

Investment $ flowing in boosts the local currency. Relatively speaking Thailand has weathered things quite decently.

[PeteC]

The USD is now over 31 and the Pound just went over 49 this afternoon. I'm still predicting 35-50/52 as we go forward. It could be more as the clean up starts and reality sets in, and it's really known what all of it will do to the economy long term. The window may be short lived though. Pete

[deepee]

The irony here is that even tho the country will suffer in the short term heaps of damaged infrastructure will need repairing and or replacing and this requires capital input. Cash will flow in from outside the country buying up the Baht add to that all that new activity will feed into higher overall growth figures eventually so, as Pete says any drop is going to be short term.

[pharvey]

Just for info.....

[Edit] Can't work out the double post... sorry.

[Spitfire]

Also might be worth remembering that the UK/US and other governments are to some extent manipulating their currencies downwards in the vain hope of exporting their way out of the worst of it, nobody wants a high value currency when the chips are down like this. So, the Thai baht is really quite over-valued at the moment and it's not necessarily due to it doing well as the western economies doing badly.

I don't see it (UK pound) getting back towards the high 50s to low 60s for at least 1-2 years. Just have to sit tight and wait as it's certainly not the deal (which we all got used to) it once was a few years ago.

Yeah.....sucks like this.