Foreign reserves at 3-year low following baht's depreciation
The country's foreign reserves have dropped to a three-year low, sparked by the recent sharp depreciation of the baht, which apparently involved intervention by the Bank of Thailand.
According to BOT data, the reserves on August 30 stood at US$168.77 billion (Bt5.46 trillion) – a fall of $1.69 billion from the week before and $3.46 billion lower than in early August.
The weaker baht will exacerbate the state of the economy, as it will raise the cost of Thai energy imports in light of increasing oil prices due to the crisis in Syria, said the central bank.
"There could be an impact [on crude prices] only for the short term, as global demand depends on the world’s economy," BOT Assistant Governor Paiboon Kittisrikangwan said yesterday.
Oil prices may not rise sharply as the global economy will likely expand at a gradual pace, and that would not lead to high demand for oil, he said.
Siam Commercial Bank, meanwhile, estimates a surge in oil prices in the short term.
The SCB Economic Intelligence Centre said the US Congress would authorise President Barack Obama to conduct a limited US military operation against Syria, which could send Brent crude up to $125 per barrel.
If the conflict were to spread and affect regional oil producers and exporters, Brent crude could jump to $150 per barrel, it said.
However, crude prices will in any case likely rise in the short term, as Organisation for Economic Cooperation and Development countries are expected to release some of their Strategic Petroleum Reserve to ease tightening global demand for oil, the centre added.
Gold price factors
The baht’s depreciation and the US Federal Reserve’s likely tapering of its monetary stimulus, which could prompt huge US dollar sales, have become the greatest concerns affecting gold prices, while a conflict between Syria and the US is expected only to be only a short-term factor, according to a survey this past week by the Gold Traders Association.
"If the likely war is prolonged, that could certainly affect gold prices as a result of likely rises in oil prices. Gold is an asset to manage risks against oil. In wars, investors prefer to accumulate gold," said Kamolthan Paisalvichit, director of the Gold Research Centre.
September’s gold-price confidence index rose for the second consecutive month to 63.99 points, up from 53.35 in August. The three-month index rose to 67.08 points from 55.74 a month earlier, according to the centre.
Looking one month ahead, the gold price is expected to move in a range of $1,340-$1,480 an ounce, or Bt21,000-Bt22,500 per baht weight, Kamolthan said.
He suggested that investors should focus on short-term trading and maintain close monitoring, given the number of negative factors currently at play.
