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Flashermac

Bank of Thailand's hawkish tilt adds another tailwind for baht

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Bank of Thailand's hawkish tilt adds another tailwind for baht

The Bank of Thailand is giving the baht -- the most-loved emerging-market currency this month -- one more reason to keep up its outperformance.

Piggybacking on a strong current-account surplus, the baht has braved developing-market doldrums and topped returns among 24 currencies tracked by Bloomberg. It is also the sole gainer in Asia this quarter.

As investors await the Aug 31 release of Thailand’s latest balance of payments data, a recent hawkish tilt by the central bank is adding to the currency’s allure.

There is less need now for an extremely accommodative stance since the recovery in the economy is clearer, BoT Governor Veerathai Santiprabhob said on Monday, adding that it can’t go against the global trends in interest-rate policy.

The baht’s stability and benign inflation have enabled Thailand to hold interest rates at a near record-low of 1.5% even as countries including Indonesia, India and the Philippines have tightened.

Mr Veerathai’s comments have already prompted Nomura Holdings Inc to forecast a 25-basis points rate hike at the Sept 19 meeting. Minutes of the Monetary Policy Committee’s latest gathering showed officials discussed "conditions and appropriate timing to begin normalizing monetary policy in the future.”

Technical analysis also points to potential gains for the currency, as the dollar-baht’s failure to breach a key resistance around 33.50 has seen the pair resume its downtrend.

Dollar-baht below its 50-day moving average on Monday, and may look to test support around 32.363 -- its high from May 21, given the growing bearish momentum. 

The pair’s moving-average convergence-divergence has declined below zero, having already fallen below its signal line. A breach of the May high may see it head toward support around 32 in the medium term.

Best in Asia

At 32.76 to a dollar on Friday, the currency has climbed 1.6% this month, after data July 31 showed a higher-than-estimated current-account surplus of $4.08 billion for June.

The baht is holding up well while investors get increasingly picky about emerging markets amid a savage sell-off spurred by higher US interest rates, trade tensions and a turmoil in Turkey.

At more than 10%, Thailand has the second-highest current-account balance as a percentage of gross domestic product among developing markets in Asia. Only Taiwan has a better buffer.

While the Taiwan dollar has been hit by foreign outflows from equities and the China-US trade war, Deutsche Bank AG says the baht offers the best value in emerging Asia. Thailand has also seen net foreign inflows of $4.4 billion into its bond markets, higher than peers in Southeast Asia.

The baht is up 1.1% this quarter. It is also the only currency showing a gain for August among 24 developing-market exchange rates. That’s no mean feat given that the MSCI Emerging Markets Currency Index has dropped about 2% this month.

 

https://www.bangkokpost.com/business/finance/1528746/bank-of-thailands-hawkish-tilt-adds-another-tailwind-for-baht?utm_source=bangkopost.com&utm_medium=article_business&utm_campaign=most_view_bottom_box

 

I wish they'd stop effing around with it. The baht is definitely overvalued.

 

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4 hours ago, Flashermac said:

 

 

Quote

 

I wish they'd stop effing around with it. The baht is definitely overvalued.

 

But is it overvalued? Remember pre 1996 Currency Crisis it was always around 25THB / USD (fark close on quarter of a Centruary ago) 

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MPIH,

I agree with that, but as I previously stated is the THB not now finding  level where it should be at “Pre-Crash”days?

I don’t know and will never claim to know, I am not a Financial Analyst (in this case analyst means one who speaks out of their arse), but what I do know is the fact that my long term planning has always been based on the. 25 THB / USD rate which it has been historically.

i would rather be a pessimist who can dine on Steak in 25 years time than an optimist dining on Som Tam daily

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If the Baht goes to 25 per the US dollar, I will be grinning and send a pile over to the USA and get
the higher CD rates! 😎

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On 8/27/2018 at 7:15 PM, Flashermac said:

I wish they'd stop effing around with it. The baht is definitely overvalued.

May I ask you why you think the baht is over-valued?  I too wish it would be a bit weaker because I would benefit from a cheaper baht when I visit Thailand, but at the same time I don't think it is over-valued at all - and I would not be surprised to see it increase in value by another 10% or so over the next 24 months and settle at a level a bit stronger than 30 baht to the dollar, perhaps around 29.5 or so.

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10 hours ago, Mekong said:

I don’t know and will never claim to know, I am not a Financial Analyst (in this case analyst means one who speaks out of their arse), but what I do know is the fact that my long term planning has always been based on the. 25 THB / USD rate which it has been historically.

I think referring to that 25 baht to the dollar is really not so relevant now.  That's a long time ago - and just how long was it at that level?  For a long time, yes, but we're going back 21 years to refer to that level, basically a generation ago.  Showing your age (and time in / association with Thailand), Mr Mekhong! :)

 

10 hours ago, Mekong said:

i would rather be a pessimist who can dine on Steak in 25 years time than an optimist dining on Som Tam daily

Gotta agree with this....the baht bounces around so much that I am of the same mindset and always expect to get less baht for my dollars.

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The baht was fixed at 20 = US$1 from the 1950s to 1982, when a Japanese educated finance minister decided to let it free float. It immediately "floated" to over 30, before settling at 25. It stayed at 25 until the 1997 crash, when it briefly soared to about 52. Then left alone, it settled to 40 baht and stayed there for some time. It then sank and has been bouncing around ever since. An economist told me he felt it should be about 35 (giving me reasons that I've now forgotten). But in recent years it has been as low as 28 and as high as 40.  Right now the Bank of Thailand is trying to keep it in the low 30s, while businesses (especially tourism connected) say they want a weaker baht.

My rule is a simple one. Whenever I have to convert dollars into baht or vice versa, I will be on the wrong end of the exchange.  :(

 

https://www.bloomberg.com/news/articles/2017-06-29/thailand-copes-with-super-baht-20-years-after-currency-crashed

 

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9 hours ago, Stickman said:

  Showing your age (and time in / association with Thailand), Mr Mekhong! :)

 

 

Oi! Less of "The Age" Young Man, you aren't that far behind me, time in / association with Thailand granted. I was 24 back in 1988 when I was first working in SE Asia and one of the guys I was working with was based in Thailand back then so every R'n'R was in Thailand.

Got my first job in Thailand in 1991 a month before my 27th Birthday and it has been "Home Base" ever since. Even though I have been working in Vietnam for 5 years I still consider Thailand as home since the wife is Thai,  I own property there (Chanoot my name, Yellow Tabian Baan), some bank accounts and cards etc plus we "Get Home" for about 8 weeks per year.

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