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Looking like Baht Predictions are on the Money
The evolution of the baht in recent years is eye-opening, to say the least, and it has prompted commentators to debate where it will go next: continuing to strengthen or finding its historical ‘natural position’.
Back in 2005, the THB’s exchange rate against the US dollar was 41.07. By 2012, it had strengthened to 30.63 and on 19th March of this year it was at 29.13. One month later, the US dollar was being exchanged for only THB 28.67 and remained below the 30 mark until the end of May.
At an MBMG lunch event on 20th March, Dr. Kirida Bhaopichtr, senior economist at the World Bank and MBMG managing partner Paul Gambles both spoke about how the baht’s strength was reliant on the result of the policy debate between the government, who wanted a weaker about to assist exports, and the Bank of Thailand (BoT) who shared the speakers’ concerns about over-stimulating the economy. As Paul put it, “If you want to know what’s going to happen to baht in the coming months and years, get a ringside seat for the boxing match between BoT and the government.”
Throughout May there was speculation that the Ministry of Finance was demanding the BoT cut in interest rates of 50 basis points. In the end it seemed a compromise was reached when on 29th May the central bank announced rate cuts of 25 basis points.
Rumours and the eventual confirmation seem to have had a profound affect on the baht’s value: at the close on 27th May you would get THB 29.86 for your USD; by 4th June you would get almost 1 baht more, as the THB weakened to 30.93.
Whilst it is too early to see any distinct pattern, the baht has been consistently around the 30.80-31.10 mark since early June. It therefore appears that Kirida and Paul were right: the general battle over policy – and the more specific debate over interest rates – is affecting the value of the baht. Keep watching closely!
* For more information on what will happen to the Thai Baht, register to the upcoming MBMG Group sponsored event, Bangkok Network and Entrepreneurs Presentation on “The Thai Economy, Baht and the SET” on Thursday, 1 August 2013 (7:00PM-9:00PM) at The FCCT (The Foreign Correspondents Club Thailand) Chitlom BTS. RSVP your attendance to email@example.com as seats will be limited.
For more MBMG blogs, updates and event schedules, visit our website at www.mbmg-group.com
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