Economists have mixed views on further decline of the baht
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ECONOMISTS agree with the Bank of Thailand (BOT)'s assessment that the baht has continued to weaken along the lines of other regional currencies in Southeast Asia as the US dollar strengthens, but they can't seem to make up their minds if the baht will
The baht closed at Bt36.432 against the US dollar on Tuesday, which represents a depreciation of around 10 per cent since the beginning of the year to date.
Roong Mallikamas, BOT’s senior director at the Macroeconomic and Monetary Policy Department, said yesterday the baht was following the depreciation of other currencies against the greenback.
The baht strengthened slightly on Wednesday to end the day at Bt36.36 per US dollar.
“The baht has indeed depreciated along the lines of other currencies in the region since the Malaysian ringgit and Indonesian rupiah have depreciated around 20 and 15 per cent, respectively, from year to date while the Thai baht has depreciated by around 10 per cent in same period of time,” said Maybank Kim Eng (Thailand) economist Tim Leelahaphan.
The baht was trading at Bt32.950 on January 1, 2015.
“These are the three worst-performing currencies in the region and all of them have been driven down by the strengthening theme of the US dollar from the expected US interest rates hike in December and this will continue to be the same story until the end of the year,” he added.
Usara Wilaipich, senior economist at Standard Chartered Bank (Thai), said the baht has been directly affected by the weak sentiment in Southeast Asian currencies because many people are concerned about the Malaysian and Indonesian currencies. Another concern is the downside risk to regional growth from China's slowdown.
Nevertheless, since the country’s currently experiencing a surplus in the current account for the past 11 months and its reserve to debt ratio is still strong, which means that the deprecation of the Thai baht peaked in the third quarter and has a chance to strengthening up towards the end of the year if Thailand’s economy has begun to pick up by then, she added.
“Malaysia and Indonesia both have debts and current account deficits so the baht will begin to break away in the opposite direction,” she said.
She expects the baht to peak at around Bt36.5 in the third quarter before rising to Bt35.6 in the fourth as she believes that the economy will improve during the last quarter of the year.
Tim agreed with Usara’s assessment that the baht is looking better than the Malaysian ringgit and Indonesian rupiah. He maintains that the baht will continue to weaken from its current position until the US interest rates finally lift off in December.
