.. BAHT - Weakening Yuan Could Push THB:USD to 39

[brutox]

http://www.nationmultimedia.com/business/Yuans-weakening-could-push-baht-to-nearly-39-per-d-30275251.html

 

Yuan’s weakening could push baht to nearly 39 per dollar, experts say

ERICH PARPART
THE NATION December 19, 2015 1:00 am

 

CHINA’S yuan could weaken by another 5-6 per cent, which could push the baht to almost 39 per US dollar in the short term, while remaining on a weakening trend until the end of the second quarter of next year, securities houses said.

The baht's slide will be affected by the deprecation of the renminbi (yuan) and the next interest-rate increases by the US Federal Reserve.

"China is the black swan, the biggest risk scenario for next year," Prinn Panitchpakdi, country head at CLSA Securities (Thailand), told reporters at the release of the FETCO-NIDA Investor Sentiment Index survey results yesterday.

"It will not be about Japan's decision on its third round of quantitative easing or how much the European Central Bank will expand its QE or how fast the Fed rate hikes will be. It will be all about China," he said.

He said China's policy to open up its command economy and its currency via the yuan's inclusion in the International Monetary Fund's Special Drawing Rights (SDR) basket before proper financial reforms would pose the biggest risk to the financial world in 2016.

"The Chinese government still has controls over its lending, interest rates, currency and capital account, and it thinks it is in control because of its high international reserve of around US$3 trillion," Prinn said.

"The current Chinese government knows what its challenges are, including non-performing loans, shadow banking, and misallocation of resources. But because it is smart, maybe too smart, its first step was to try to consolidate power via anti-corruption measures and the eradication of oppositions, which has left lingering the reform efforts within the state-owned enterprises, trying to change debt into capital. That has been causing an asset bubble within the capital market, and there is still a lot of fluctuation there," he said.

The yuan has been on a depreciation trend against the US dollar, and the Fed rate increase last Wednesday could push the currency down by another 5-6 per cent in the next six months. If that happens, the baht could reach 37-38 per dollar during the same period and could "overshoot" to nearly 39 in the short term.

Included in SDR basket

The yuan was trading at 6.317 per dollar as of November 30, the day it was included in the SDR basket, before deprecating to 6.483 as of 4.30pm yesterday. In the same period, the baht depreciated from 35.811 to 36.15.

"The overshoot could happen in the situation where the Fed increased its rates, obliging China to lower its interest rates, its reserve requirement ratio, and its promotion of investment outside the country. That means a lot of yuan going Thailand's way, as seen in the bilateral agreement on the rail project and the meetings between the countries' economic teams and delegations," Prinn said.

Tim Leelahaphan, Maybank Kim Eng Securities (Thailand) economist and assistant vice president of its research department, said the baht at 36 per dollar had already surpassed the house estimate for the end of this year. He expects the currency to continue depreciating until the end of the second quarter, since the house expects the next Fed rate increase in that quarter.

"The baht will be less attractive than India's rupee and the Philippines' peso in the first quarter, so the baht should continue weakening during that time. The Fed is expected to [increase rates again] in either March or April, so the baht should be on a weakening trend until the end of the second quarter," he said.

Meanwhile, the divergence in the reactions of central banks' monetary policy after the Fed rate increase contributed to a slump in the Stock Exchange of Thailand yesterday, and this divergence is expected to be the theme for next year, Tim said. Taiwan lowered its rates, Mexico's were raised, and Argentina devalued its currency.

The SET Index dropped by 25.42 points to 1,284.92 with a trading value of around Bt41.248 billion as of 5pm yesterday.

The FETCO-NIDA Investor Sentiment Index for December shows that overall investor confidence in the country's capital markets in the next three months has fallen slightly from November on concern about uncertainties in global markets, but the level of confidence is still in the "neutral" zone.

The index was at 100.12 points before falling by 10.69 to 89.42 points, which is in the neutral zone of 80-120 points. The index ranges from "extremely bearish" at 0-40 points to "bullish" at 160-200 points.

[happy888]

Perhaps this is more problematic than just the strength/weakness of the Thai Baht.

 

Especially as the US's Current debt is almost US$19 Trillion.

 

Ref : http://www.investopedia.com/articles/investing/022415/worlds-top-10-economies.asp?header_alt=a

 

"1. United States

The US economy is the largest economy in the world in terms of nominal GDP (measured at current prices in US dollars). The $17.41 trillion US economy is approximately 22.44 percent of the gross world product. The United States is an economic superpower that is highly advanced in terms of technology and infrastructure and has abundant natural resources. However, the US economy loses its spot as the Number One economy by a slight margin to China when measured in terms of GDP based on PPP. In these terms, China’s GDP is $17.63 trillion and the US GDP is $17.41 trillion. However, the US is way ahead of China in terms of GDP per capita (PPP)-- approximately $54,678 in the US versus $12,893 in China.

2. China

China has transformed itself from a centrally planned closed economy in the 1970’s to a manufacturing and exporting hub over the years. The Chinese economy is propelled by an equal contribution from manufacturing and services (45 percent each, approximately) with a 10 percent contribution by the agricultural sector. The Chinese economy overtook the US economy in terms of GDP based on PPP. However, the difference between the economies in terms of nominal GDP remains large. China is currently a $10.35 trillion economy and has been growing at around seven percent in the recent years. (Related reading, see: Why China Is "The World's Factory.")"

[6853395]

Fed Chairperson Yellen did raise interest rates slightly.  However, future rate increases will be taken into consideration very carefully.  For the first time, which differs from both former chairs Greenspan and Bernake, is that Yellen will hold off on further increases until there's assurances that the economy is not slowing down, including, but not limited to:

 

* Unemployment

 

* Manufacturing

 

* Economic growth

 

* Housing and real estate conditions, including if defaults are increasing, etc.

 

There are some others that were discussed, but essentially, Yelen has made it clear that there will be no further increases until there's assurance and evidence that the economy is not slowing down as the result of the increase last Wednesday.

 

This is been deemed one of the smartest moves ever, and I'm pleased to see how these matters are being taken into consideration.

 

No one can forecast currency fluctuations, and time will tell whether the Fed makes another move based on the conditions noted above.

[THAJEC]

Fed Chairperson Yellen did raise interest rates slightly.  However, future rate increases will be taken into consideration very carefully.  For the first time, which differs from both former chairs Greenspan and Bernake, is that Yellen will hold off on further increases until there's assurances that the economy is not slowing down, including, but not limited to:

 

* Unemployment

 

* Manufacturing

 

* Economic growth

 

* Housing and real estate conditions, including if defaults are increasing, etc.

 

There are some others that were discussed, but essentially, Yelen has made it clear that there will be no further increases until there's assurance and evidence that the economy is not slowing down as the result of the increase last Wednesday.

 

This is been deemed one of the smartest moves ever, and I'm pleased to see how these matters are being taken into consideration.

 

No one can forecast currency fluctuations, and time will tell whether the Fed makes another move based on the conditions noted above.

Also needed growth in inflation have forgotten.

[6853395]

Yes, I didn't list them all.  I'm taking this from memory an event, and brief presentation, while I was attending a function regarding the California economy on Thursday.

[alexilaiho]

Yuan is around 15% Over valued against USD, so we might see further weakimg of yuan or even devaluation by Chinese central bank.

 

Sent from my HTC One_M8 using Tapatalk

[mryang]

This is a gist according to Martin Armstrong - arguably the number one authority when it comes to forecasting currency trends and fx markets:

 

The reason dollar gets stronger is because of capital flight from emerging markets and BRICS - The dollar is not worth more - but other currencies is just worth less when their economies implode (such as Brazil).

Country after country will default and during this time (2016-2017) dollar vill go up and commodities including pm markets go down.

 

However, dollar - as the last currency standing - is not going to help US from self-defaulting either - and when this happened - preferably before - the continental US will become a very dangerous place.

 

All commodities and equities will reset down to the 90% target before the economy will turn to the upside.

 

*****************

I have no clue if this is reasonable or not but he called the russian implosion 1998, the dotcom crash, the real estate collaps 2008 and the EU sovereign debt crisis on a computer program made 1988. When the CIA wanted his program - he refused and ended up 12 years in prison. So clearly a dangerous mind for the state.

[Frenchguy99]

Anyway, thats great for us Westerners. some good deal in real estate are coming