Baht hits one-year high against dollar

Baht hits one-year high reaching 34.72 against US dollar with Brexit & weak US economy causing investment funds to flow into Thailand.

ECONOMICS

Baht hits one-year high against dollar

02/08/2016
Pathom Sangwongwanich

The baht hit a one-year high (peak) against the US dollar yesterday reaching 34.72 to the dollar.

Capital inflows into Thailand's stock market (equities market) have been identified as the main source of the baht's appreciation and strength.

STRONG CURRENCY, APPRECIATION, REACH A HIGH OR PEAK: SOME VOCABULARY

Just to review a bit, a "strong baht" ("strong currency") means the baht is worth more or buys more than other currencies, with the dollar being the most important currency used for comparison.   

"Baht appreciation" or "the baht appreciates" means the currency increases in value compared to other currencies.

When the baht "hits a high" or "hits a peak", the baht is more valuable than in the past.

The opposite is when the baht "hits a low" or there is a "weak baht" or "the baht depreciates" or there is "baht depreciation".

[Note: Also worth remembering is that currency graphs (like the one below) usually show Thai baht per US dollar. More baht per dollar means the baht is worth less and higher on the graph. Less baht per dollar means the baht is worth more and lower on the graph. A "peak" or ""high" point is actually low on the graph, not high, something that does not make sense until you think about it.]

CAUSES: BREXIT & WEAK US ECONOMY

Both Brexit and weaker-than-expected US economic economic statistics are seen as the main causes of the strengthening baht as greater fund flows have shifted towards investment in emerging markets.

Stimulus measures announced by the Japanese government and the Bank of Japan are not seen as having a substantial impact on the baht's appreciation.

The baht has been tracking emerging market currency strength as fading prospects of a US rate increase revved up investor appetite.

Thai companies repatriating overseas dividends is another factor causing baht appreciation, according to TMB Analytics vice-president Jitipol Puksamatanan.

"The baht has not appreciated considerably as its year-to-date appreciation is registered at 3.8% against the US dollar, compared with a 5-6% year-to-date appreciation of the Malaysian ringgit and Singapore dollar," Mr. Jitipol said.

BAHT HAS DONE WELL IN PREVAILING CURRENCY WAR

The Bank of Thailand (BOT) is not expected to resist the baht's appreciating trend.

The central bank is, however, expected to continue to intervene in foreign exchange markets in order to stabilise the baht's value, Mr Jitipol said.

The central bank is deemed to have done well amid the prevailing currency war as reflected by the baht's stable value, he said.

The central bank has held its 1.5% policy interest rate for a long period and the move does not seem to signal a clear economic recovery which could confuse businesses, according to Mr. Jitipol.

Other central banks have opted to lower interest rates amid low inflationary pressure, he added.

FOREIGN PORTFOLIO INVESTMENT UP 

Foreign portfolio investment was registered at US$2.23 billion in June, up significantly from a contraction of $549 million a month earlier, according to Bank of Thailand data.

Of the $2.23 billion, $1.25 billion was attributed to equity investment and $977 million to debt securities investment.

Substantial foreign fund inflows in June were a result of foreign investors returning to buy Thai securities following the Brexit vote and the US central bank (Federal Reserve) being expected to delay its interest rate normalisation until year-end or early next year, said the central bank's latest Economics and Monetary Conditions Report.

Short-term borrowing by financial institutions and foreign direct investment (FDI) in the telecommunications sector were other factors contributing to significant capital inflows.

http://www.bangkokpost.com/business/finance/1050365/baht-hits-one-year-high-against-dollar

สามารถฝึกอ่านออกเสียงและดูคำแปลได้ที่ : http://www.bangkokpost.com/learning/learning-from-news/1050974/baht-hits-one-year-high-against-dollar