Bank of Thailand cuts key interest rate by 25 basis points in attempt to weaken the baht

[The Pattaya News]

Bangkok- The Bank of Thailand unexpectedly cut its benchmark interest rate on Wednesday, August 7th, 2019 for the first time since 2015, which should support faltering growth and weaken the strong baht. The Bank of Thailand’s monetary policy committee voted 5-2 to cut the one-day repurchase rate by 25 basis points to 1.50% – the […]

The post Bank of Thailand cuts key interest rate by 25 basis points in attempt to weaken the baht appeared first on The Pattaya News.

Click To View The Pattaya News Website

[Scuba+]

GBP|THB rate hasn't moved

 

[farangliam]

it won't until people start thinking more rate cuts are to come and try and short the market.

[Scuba+]

it won't until people start thinking more rate cuts are to come and try and short the market.

usually rate changes or even talk of rate changes have an immediate effect

[Zeb]

The Kiwi Central Bank cut by .50% today - all another indication of the 'Currency Wars' and the race to weaken currencies to "protect" comparable advantages etc.

Thai interest rates rates still look high in comparison and points to the reason it is strong against other currencies.

[farangliam]

if the chatter is believed.

[Zeb]

1 hour ago, farangliam said:

if the chatter is believed.

 

Quote

NZ's turn in bond market's race to the bottom

 

7-9 minutes

---

 

Aug 7, 2019 — 7.25pm

The Reserve Bank of New Zealand has joined the global race to the bottom, declaring it will do "whatever it takes" and echoing the famous promise by European Central Bank president Mario Draghi that preceded an era of zero per cent interest rates that Europe has never escaped from.

RBNZ governor Adrian Orr's shock move to cut rates by half a percentage point and get in front of the escalating global currency war sent Australian 10-year bonds to a fresh record low 0.96 per cent. It is the greatest rally in Australian bonds since at least the 1980s, when Paul Volcker snapped the force of high inflation.

"It's very clear that interest rates are going to zero everywhere in the world," said Vimal Gor, head of bond, income and defensive strategies at Pendal. "This is a currency war, it's very clearly a currency war, and the authorities are not pretending otherwise.

"When the pie isn’t getting any bigger, you need to try and engineer a bigger slice of it for yourself."

Expectations of multiple Reserve Bank rate cuts surged and the Australian dollar tumbled.

The Australian dollar tumbled to US66.76¢ in the wake of the RBNZ's decision, which Mr Orr described as necessary to counter the uncertainty around growth, meet the central bank's inflation and employment mandate, and avert the risk of importing deflation.

"It remains within the remit of monetary policy to do whatever it takes to meet our mandate with our tool set," he said at a press conference following the decision.

"We are looking at the full tool suite. Without a doubt, globally when you're looking at Europe, Sweden and Japan, all with negative interest rates and us at 1 per cent, it's easily within the realms of possibility that we might have to use negative interest rates."

RBA cash rate to tumble

Economists had been expecting only a quarter of a percentage point cut from the RBNZ. Unemployment in NZ is 3.9 per cent, down from 4.2 per cent, new figures showed on Tuesday.

Traders on Wednesday scrambled to lower their assumptions for the Reserve Bank cash rate, arriving at a 54 per cent chance it hits 0.25 per cent in August next year. That implies a further three rate cuts from its current 1 per cent cash rate.

Seven years ago Mr Draghi pledged to save the euro, telling the world he would do "whatever it takes" to save the monetary union. The eurozone has been unable to extract itself from negative interest rates and the entire Swiss and German yield curves are now in negative territory.

What began as a revival of the US-China trade war on Friday has escalated into a tariff and currency war being waged by the world's two largest economies. As doubts mount around global growth, prices of bonds, shares, gold and the foreign exchange market have swung wildly on fears that trade will stall and central banks are ill-equipped to come to the rescue.

The People's Bank of China on Monday declined to defend the 7 yuan to the US dollar level considered a line in the sand for the renminbi. It was the first time it exceeded 7 yuan per greenback since 2008. On Wednesday the PBOC set the daily fix at 6.9996 (a level stronger than 7), however, it is trading at 7.0393 because the currency is allowed to move in a range beyond the official fix.

By Tuesday, the US Treasury accused China of outright currency manipulation.

Gold in the spot market is fetching $US1488 an ounce, and ASX-listed gold miners have surged since the trade war broke out. Newcrest Mining led the sharemarket's gains on Wednesday with a 3.8 per cent advance to close at $37.34.

Exposed to trade shock

"Australia's catching down to the rest of the world," explained Macquarie's top economist, Ric Deverell. The mining investment boom protected the economy from the last global downturn but Australia can no longer count on the same support.

The terms of trade was in surplus by a record $8 billion in June, official figures showed on Wednesday, but the price of key export iron ore has been crushed by the tariff war. It was fetching $US97.55 a tonne, down from $US123.19 a tonne on July 2.

"We're having a global slowdown scare and the epicentre of that is the trade shock," Mr Deverell said. "The market is very concerned we'll have a repeat of the last quarter in 2018. The bond market is factoring that in, but the central banks are providing some assurance that the trade event doesn't turn into an economic event."

The US economic recovery is 11 years old and the Federal Reserve will not be afforded the same policy space going into the next recession, he said.

"You can't have the big monetary reaction that you normally have, given that interest rates go to zero almost everywhere and probably have to stay there a very long time," Mr Deverell said. "And this time that includes us."

However, in reality, Europe has been living with zero or negative interest rates for years now and the consequences are not as extreme as feared, he emphasised. "By nature, people think there's something wrong if rates are this low."

The key thing is "the rest of the world's had this for a long time".

More to come

The New Zealand dollar plummeted 2.1 per cent on the RBNZ's rates decision, to US64.08¢, touching its lowest level since January 2015. The RBNZ debated the idea of cutting rates by 25 basis points, but concluded a stronger response was necessary.

Mr Orr also refused to rule out the possibility he would cut interest rates further, providing greater conviction than when he was asked the same question in May. The RBNZ was one of the first advanced central banks to ease this year, when it cut rates from 1.75 per cent three months ago.

"Today's decision doesn't rule out any further action," he said.

"Our forward path provides a good guidance as to how we see the interest rate path unfolding [but] nothing is ruled out for the future."

However, Mr Orr disputed that he was joining the international currency war: "I don't even know how you'd actively play that game. I'm not sure that you can."

The fallout from the war between the US and China has translated to measurably weaker activity. German industrial production fell 1.5 per cent month on month in June, it emerged on Wednesday, hours before the start of the European trading session.

"With the tariff wars and growing protectionism, we are moving away from being able to access global labour markets and manufacturing capacity," Pendal's Mr Gor said. "This redrawing of supply chains has to result in greater volatility of economic data and asset prices."

A confluence of factors has held down global inflation and free trade is a major one, he argued. As countries retreat within their own borders the risk is that inflation comes back in the medium term, the bond fund manager said.

On Tuesday, the Reserve Bank of Australia kept rates at a record-low 1 per cent but acknowledged (again) its willingness to do more "if needed". The Reserve Bank's easing bias is perceived to have strengthened and it is expected to formally trim its growth, inflation and unemployment forecasts at Friday's quarterly statement on monetary policy.

https://www.afr.com/markets/debt-markets/nz-s-turn-in-bond-market-s-race-to-the-bottom-20190807-p52eum

[farangliam]

2 hours ago, Scuba+ said:

3 hours ago, farangliam said:

it won't until people start thinking more rate cuts are to come and try and short the market.

usually rate changes or even talk of rate changes have an immediate effect

if the chatter is believed.

[FarangKiNok]

20 hours ago, farangliam said:

if the chatter is believed.

Chatter?

Currency trading is the largest marked in the world and bigger than commodity. If indications are that the bath is weakening traders will dump  in large numbers. Chatter, that is for amateur traders that are too late for the prom.  

[Scuba+]

usually rate changes or even talk of rate changes have an immediate effect

https://www.bangkokpost.com/business/1726715/baht-shrugs-off-rate-cut

[THAJEC]

13 hours ago, Scuba+ said:

https://www.bangkokpost.com/business/1726715/baht-shrugs-off-rate-cut

The Thai Chamber of Commerce, at its joint meeting with the National Bank of Thailand (BoT) on August 8, requested a repeated rate cut. The next BoT meeting is in September, specifically September 25th. so we'll see. Then, November 6th, these are the last 2 session options to adjust the course, before my visit to the town.