Baht, SET soar on ECB easing move

The baht opened at 35.08 to the US dollar, the highest in five months. The SET Index yesterday was also up by 14.53 points, closing at 1,393.41 in response to the ECB’s monetary-easing, as investors expected to see an influx of capital into emerging markets. 

Meanwhile, the bullion gold price in Thailand’s spot market yesterday also surged by Bt400 to Bt21,000/Bt21,300 per baht weight gold, resulting from a $15 per ounce rise in the global futures prices that hit a new high of US$1,272 per ounce.

The ECB recently lowered the main rate at which it lends to commercial banks – the so-called refi rate – to zero for the first time ever from 0.05 per cent.

It pushed up the interest rate on its deposit facility for commercial banks to minus .40 per cent from minus 0.30 per cent. This means commercial banks in fact pay the ECB if they choose to transfer their excess funds at the end of the day.

The rate on its marginal lending facility, – the ECB’s overnight credit to banks – has been lowered to 0.25 per cent from 0.30 per cent.

The ECB also announced it would expand the volume of bonds it purchases each month under its programme of quantitative easing (QE) to 80 billion euros ($88 billion) from 60 billion euros. And it would also start buying corporate bonds under the QE programme.

Siam Commercial Bank’s Economic Intelligence said if the baht strengthened at a rate faster than other currencies, this might put pressure on the Thai central bank to cut its policy rate.

Year to date, the Thai currency has appreciated by 2.3 per cent while Malaysia’s ringgit has strengthened by 4.2 per cent, and the Indonesian rupiah by 5.1 per cent. 

“However, there is little chance of the Monetary Policy Committee meeting on March 23 reducing the policy rate to depreciate the value of the baht,” the EIC said. The ECB’s money-easing measure is expected to delay a hike in the US interest rate to keep the momentum of the global economy. But this will only result in a slight depreciation of the baht, according to local economists.

As for the baht, it’s not depreciated much as a result of the ECB’s stimulus package, she said, adding the trigger that could weaken the baht was the US Federal Reserve’s decision to hike its Fed fund rate, said Pimonwan Mahujchariyawong, assistant managing director of Kasikorn Research Centre. 

The Fed is expected to hold its policy rate and consider raising it again in the middle of this year, she said.

Amonthep Chawla, head of CIMB Thai Bank’s research office, said the clear result of the ECB’s stimulus measure announcement was the euro did not depreciate against the US dollar. Capital funds also flew to emerging markets, strengthening the baht in the short term.