Nominated finance minister warns baht could appreciate too much

Vorapak Tanyawong, who has been nominated as the next finance minister, warned on Thursday that the baht could appreciate too quickly because the US Federal Reserve (Fed) cut its central bank’s interest rate by a quarter of a percentage point.

Vorapak, a former chief advisor to former finance minister Pichai Chunhavajira, said the US rate cut would prompt foreign investors to turn towards investing in Thai bonds and the investment markets in Southeast Asia.

Vorapak noted that the Fed had signalled it would cut the rate two more times this year, which would narrow the interest rate differential between Thailand and the US.

This trend could lead to foreign funds pouring into the Thai capital market too quickly, causing the baht to strengthen excessively.

Vorapak, a former CEO of Krungthai Bank, said that if the Fed continued to lower the rate while US inflation remained above 2%, the fluctuation of the US dollar would increase, leading to further volatility in the baht due to the risk-on/risk-off situation.

Vorapak added that this situation would challenge the Bank of Thailand to consider how to ensure smooth operations to prevent the baht from appreciating too much, which could negatively affect exporters and tourism.

Prime Minister Anutin Charnvirakul has confirmed that he nominated Vorapak as finance minister and has submitted his Cabinet list for royal approval.