ASEAN KEY DESTINATIONS
Bank of Thailand and the Thai Baht
Economist and Hedge Fund Manager Shayne Heffernan takes a look at the Thai Baht.
The Thai Baht has taken the path we suggested last year, in fact when I spoke to former Prime Minister in 2011 I informed him I had estimated that by 2015 the Thai Baht will be at a rate of 23 to 1 USD (see original) for now it has headed towards 28.50 as Japan and Korea recklessly print money to stimulate the economy.
So far, Bank of Thailand (BoT) governor Prasarn Trairatvorakul has taken the appropriate action and is continuing to do so despite political pressure. A move that has to give investors some confidence in Thailand as an investment destination.
The Baht is under increasing pressure as the world embarks on a currency cold war, in this instance the Thai economy is a victim of it’s own success, but directly taking an action to move the value of the Baht now would be a mistake.
BoT governor Prasarn Trairatvorakul has taken a wise wait and see approach to the serious problem, although there is some pain for exporters the current environment is an excellent opportunity for Thai companies and individuals to build offshore investments and expand at a global level, long term that is a great thing for Thailand.
While there are many calls to cut the repurchase rate, doing so now would have little impact on the value of the Baht and would not be beneficial to the economy in the long term.
What Thai politicians should be focusing on is voicing their concerns regarding the actions of Japan, Korea, the USA and Europe where so called easy monetary policy and excessive financial regulation is forcing hot money in to emerging markets. The Thai Baht is not the problem, it is the victim.
Another thing Thai politicians could do is relax the rules on funds leaving the country and encourage corporate expansion around the world, specifically in Asia.
The Thai corporate sector has a lot to offer on the international markets.
As far as the Thai Baht, the country is not in any real economic danger until the Baht hits 25, at that point I think everyone will be pleased that BoT governor Prasarn Trairatvorakul was cautious and has a full range of options at his disposal.
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Live Trading News
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