After the baht appreciated 8 per cent so far this year, concern about the economic consequences of such a rise is becoming more evident especially when a further rise in the baht is being anticipated.
The belief that the baht will continue to rise is not far-fetched when viewed within the broader context in which the central banks of the G3 key reserve currencies – US dollar, euro and yen – are committed to near zero interest rates and quantitative easing.
The global monetary easing we are witnessing today is unprecedented. This is because the major economies are unable or unwilling to use fiscal policy to counter the economic slowdown that is now evident. For example, the US is mired in the politics of the November mid-term election, which will likely allow the Bush tax cuts to expire, implying a tightening of fiscal policy next year. Few other fiscal stimulus programmes are likely to come about even though US GDP will grow only about 1.5-1.6 per cent during the second half of this year.
In Europe the fear of falling victim to a “Greek tragedy” had most countries committing to fiscal tightening starting in 2011. This is even as eurozone GDP growth is expected to be an anaemic 1 per cent during the second half of this year, with most of the periphery countries mired in recession. During the same period, Japan’s GDP growth is expected to be less than 1 per cent.
The inability to use fiscal policy means that the job of engineering the economic recoveries of the G3 must rest solely on the shoulders of monetary policy. Near zero interest rates were put in place nearly two years ago in December 2008. But this is clearly not sufficient in the context of the devastating losses suffered by the banking system, over-leveraged consumers and near 10-per-cent unemployment.
Enter quantitative easing (QE), in which the G3 central banks not only depress short-term interest rates but also print money to buy bonds so that longer-term interest rates are kept exceptionally low as well.
On September 21, the US Federal Reserve said in effect that the US economy is slowing down and that inflation is too low. Economists see this as a signal that the Fed is moving ever closer to QE2, when it would intensify its purchases of US treasuries in order to bring long-term interest rates down even further to offset the possibility of a double-dip recession.
Meanwhile, the European Central Bank continues its policy to give unlimited credit to commercial banks. Closer to us, the Bank of Japan is believed to be conducting unsterilised intervention to weaken the yen, which means trillions more yen are being put into circulation.
|Currency Exchange Rate||Date : 28 September 2010|
|Update : 1 Effective From : 8:30||[Unit : Baht per 1 unit of foreign currency]|
Bangkok 7th World Most connected city to China
Bangkok also ranks 3rd in terms of the volume of Chinese corporate leasing activity over the last three years, according to a new report from real estate consulting firm JLL.
While China’s biggest corporates are increasingly flexing their global muscle as the country’s economic and geopolitical influence accelerates, Bangkok is the 10th most popular destination for mainland firms expanding overseas. (more…)
Thailand’s Special Economic Zones (SEZ) and new opportunity connected
The SEZ policy was first launched in 2015 based on the government’s belief in the strong potential of the 10 areas to connect with the neighboring countries in terms of trade, economy and investment
With its strategic location in the center of ASEAN with emerging markets, including Cambodia, Laos, Myanmar, Malaysia and southern China, on its border, Thailand is well position to connect investors to new opportunities arising from the increasing border trade and the region’s rapid economic growth.
Decrypting the Crypto Bubble : China Ban Vs. Thailand’s cautious welcome
ICO has gained popularity among tech startups as a convenient and timely way to access funding. In the past few months, ICO has grown exponentially and has surpassed early stage venture capital funding
Subscribe via Email
Thai fruit exports to FTA markets up 107 percent
China, Malaysia, Singapore, Indonesia, the Philippines, Hong Kong, Australia and Chile are top importers of Thai fruits, especially fresh durian,...
Digital Revolution and Repression in Myanmar and Thailand
Activists have also proactively published social media content in multiple languages using the hashtags #WhatsHappeningInMyanmar and #WhatsHappeningInThailand to boost coverage...
3 Reasons to Be Optimistic About the Baht Right Now
Probably one of the most important factors for the rise of the Baht is the continued weakness of the US...
Will Thailand’s plan for quarantine-free tourism set a global trend?
According to the Tourism Authority of Thailand, the quarantine-exemption measures implemented in Phuket will be extended to five other key...
Thailand Approves Latest Economic Relief Package for Businesses
Some 250 billion baht (US$8 billion) was allocated for soft loans while the remaining 100 billion baht (US$3.2 billion) will...
Southeast Asia remains a hot spot for plastic pollution
The use of plastics is deeply embedded in our daily lives, in everything from grocery bags and cutlery to water...