Thailand’s baht is likely to strengthen further and break through the level of 28 to the US dollar next year, according to a leading private sector economist.
Dr Sethaput Suthiwart-Narueput, head of the Siam Commercial Bank (SCB) Economic Intelligence Center, said the Chinese central bank is expected to let its currency, the yuan, appreciate by 4-6 per cent or 5 per cent on average.
So, it is very likely the baht will strengthen in the same direction as the yuan by 5 per cent to around 28 late next year from its level of 29 to the US dollar now.
So far, he said, the yuan had appreciated sharply by 21 per cent while the baht had surged by 27 per cent.
Dr Sethaput said he believed the Bank of Thailand (BoT) Monetary Policy Committee will not raise the policy interest rate at its meeting on Dec 1 since it did not want to see the baht strengthen further.
He said the inflation rate projected by the central bank is higher than it should be since it believed the government will extend its measures to help ease the cost of living for low-income people.
The SCB chief economist projected that foreign direct investment (FDI) will continue flowing into the country next year, but at a slower pace and the current account balance will continue in surplus.
Thai Finance Minister Korn Chatikavanij has said that he did not expect the 600 billion U.S. dollars injection into the U.S. economy to have any immediate effect on the Thai currency and its capital market.
Korn said the Thai government’s existing measures remained effective enough to control the rising baht as the US Federal Reserve’s announcement was in line with the government’s earlier estimate of 500-700 billion dollars, according to local media reports.
The US Federal Reserve announced Thursday that it will buy an additional 600 billion dollars of treasuries through June next year, which could further depreciate the greenback.
Central banks from China to India and Australia have raised interest rates to curb inflationary pressures at a time when Japan and the U.S. are adding monetary stimulus to boost economic growth.
Lots of Investment management Companies are investing in local currency debt and foreign exchange contracts in Asia on the basis that currencies in that region are undervalued.
The Chinese yuan in particular is likely to feel strong appreciation pressure in coming years, Toloui said. To benefit from this trend, Pimco is investing in yuan-denominated nondeliverable forwards, a type of offshore financial contract linked to a currency’s value. The firm also sees room for the Singaporean dollar, the Korean won, and the Philippine peso to appreciate.
The most recent strength of emerging market currencies has set off a war of words among policymakers around the world. Emerging nations argue that the U.S. Federal Reserve, through an aggressive bond purchase plan, is essentially printing money that will flow into overseas markets, create asset bubbles and further drive up emerging currencies versus the dollar. The Fed, meanwhile, says that by keeping their currencies artificially low, emerging markets risk overheating their economies.
|Currency Exchange Rate||Date : 24 November 2010|
|Update : 1 Effective From : 8:30||[Unit : Baht per 1 unit of foreign currency]|