Baht sees slight decline since end-April
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The baht has weakened slightly from the end of April, as investors became risk-averse after France's election last weekend, while the euro zone's sovereign debt problem continues to pose the highest risk for the Thai money markets, according to the Bank
Singhachai Boonyayotin, BOT senior director for the Financial Markets Department, said the baht had moved in line with other regional currencies, weakening 0.7 per cent against the US dollar since April 30. However, because of a more balanced flow of capital, pressure on the local currency has been limited.
Some other regional currencies have depreciated more than the baht, such as Malaysia’s ringgit by about 1 per cent and the New Taiwan dollar by 3.2 per cent.
The Thai currency ended trading at Bt31 per US dollar yesterday,
Since the beginning of the year, however, the baht has strengthened 1.81 per cent as investors had more risk appetite as a result of improved US economic figures and monetary easing in major economies, Singhachai said in a briefing yesterday.
The baht moved in a range of 30.29 to 31.87 per US dollar during the first quarter, weakening in mid-January after Standard & Poor’s downgraded credit ratings of nine euro-zone countries.
Foreign investors continued to pour their money into Thailand. In the first quarter, about US$5.12 billion (Bt157 billion) of foreign capital entered the Thai bond market and $2.73 billion was invested in the Thai equity market.
Other regional markets such as Malaysia, Indonesia and the Philippines also saw inflows of foreign capital.
The Thai currency tends to move along with its regional peers, but there are some risks that need close monitoring, especially in the euro zone.
“Market concern eased on Greece’s [debt] problem early this year, but worries have returned over Spain and Italy,” Singhachai said.
The baht’s volatility has dropped from 6-7 per cent early this year to about 4 per cent now, and other regional currencies’ volatility also declined on improved global market sentiment, he added.
Other risks come from China’s economic slowdown and economic divergence between the United States and the European Union.
“The US may have bottomed out, as the US Federal Reserve will keep the Fed Fund Rate low until 2014, while Europe is slowing down. This could cause currency fluctuation globally,” Singhachai said.
