Bank of Thailand Cuts Policy Rate - Baht Remains Strong

[Bunky]

Thailand Says Policy Committee Won’t Interfere With Central Bank

By Suttinee Yuvejwattana

Bloomberg.com

August 9, 2019, 12:55 AM EDT Updated on August 9, 2019, 3:56 AM EDT

Thailand said a planned policy-coordination committee comprising Finance Ministry and central bank officials won’t interfere with the workings of the monetary authority.

“They have their own work and power,” Finance Minister Uttama Savanayana told reporters Friday in Bangkok. “We won’t interfere with that.”

Thailand plans to set up a joint panel with officials from the Finance Ministry, Bank of Thailand and other agencies to ensure monetary and fiscal policies are synchronized. Uttama’s comments appear intended to counter concern that the panel imperils the central bank’s independence, as officials grapple with a sharp slowdown in the economy.

The panel members will share information, and economic agencies need to work together as global challenges intensify, Uttama said, adding the committee will be established soon.

Deputy Prime Minister Somkid Jatusripitak announced the plan for the coordinating panel on Thursday, a day after the Bank of Thailand unexpectedly cut its benchmark interest rate for the first time since 2015, to 1.50% from 1.75%.

‘Storm Ahead’

“Fiscal and monetary policies must work hand in hand,” Somkid told reporters on Friday. “They need to work closely and systematically as there is a storm ahead.”

Thailand’s exports and tourism reliant economy has weakened amid a surging currency and the fallout of the U.S.-China trade war. Business lobbies and even the country’s industry minister have called for more steps to restrain the exchange rate.

The baht’s 8% appreciation against the dollar in the past year is the strongest in a basket of emerging-market currencies tracked by Bloomberg.

The Bank of Thailand said in a statement Friday the rise in foreign-exchange reserves reflects its management of the baht but that it needs to be cautious to avoid criticism that it’s manipulating the currency. The reserves have reached a record of $219.1 billion.

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Thai baht may need another ‘haircut’ by the Bank of Thailand before the end of 2019

By The Thaiger & The Nation

8/8/19

Wednesday’s rate cut by the Bank of Thailand has not succeeded in reining in the surging baht, raising the prospect of another interest rate cut by 0.25 of a percentage point before the year-end.

While the central bank’s statement on the policy rate reduction didn’t mention the strength of the baht, economists suspect the baht’s strength and its impact on the Thai economy was a key reason for the Monetary Policy Committee’s decision. Yesterday they lowered the key interest rate by 0.25 percentage point – from 1.75% to 1.50%.

Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre says the Central Bank would have taken the sluggish economic growth into account.

“The baht has appreciated by 5.5% in 2019 when compared to neighbouring currencies, and the economic impact of the baht’s strength are starting to show in the country’s poor export performance”.

The Economic Intelligence Centre expects the BOT to reduce interest rate once more in 2019 by 0.25%, taking down the policy interest rate to 1.25% due to economic factors such as the impacts of the US-China trade war which has escalated to a currency war.

The baht was valued at 30.77 baht to the US dollar on August 7 after the interest rate cut, weakening by only 0.01 from 0.76 baht per US dollar on August 6.

The effectiveness of the central bank’s past measures to curb the strengthening baht has been unclear, said Tim Leelahaphan, an economist with Standard Chartered Bank.

On July 12, the BOT reduced the limits for outstanding balances of non-resident baht accounts and non-resident baht accounts for securities from 300 million to 200 million baht per non-resident.

Market analysts saw this announcement as the central bank’s attempt to reduce speculative capital inflows into Thailand’s economy.

Since then, the baht has appreciated slightly from 30.81 to 30.77 baht per US dollar.

Economists suggest that the key reason for the baht’s strength is largely unaffected by the BOT’s measures, as Thailand’s current account surplus, valued at 6% of GDP, leads to a perception among foreign investors of the country being a “safe haven” as an investment destination.

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[englishman]

Interesting reading ..thanks

[Taa_Saparot]

Lot of baht has been spent since August the 9th.

[MaryPoppins]

once the US cuts its interest rates later this year then this may well trigger a further surge of US dollars invested into Thailand due to it been deemed a safe haven, then the baht will further strengthen against the US and all other currencies... the baht has been strong in the past but that was compensated by the low prices set in Thailand, as recent as 2009 the baht was in a  strong cycle.... The prices set now in Thailand make it almost cost effective to stay in the United States in places like Vegas and party rather than go to Pattaya... How long the tourist driven industries can sustain the large drop in the numbers remains to be seen, but my guess would be a poor high season will see many small operators go if they haven't already. shame.... 

[allwet]

It’ll be interesting to see how low the Pound goes come October. Buckle your seat belts!

[Pheat]

1 hour ago, MaryPoppins said:

The prices set now in Thailand make it almost cost effective to stay in the United States in places like Vegas and party rather than go to Pattaya

555

[Taa_Saparot]

30 minutes ago, allwet said:

It’ll be interesting to see how low the Pound goes come October. Buckle your seat belts!

Unless its already factored in.

[fforest]

2 hours ago, MaryPoppins said:

The prices set now in Thailand make it almost cost effective to stay in the United States in places like Vegas and party rather than go to Pattaya...

If you stay in a super budget motel and only watch T.V in your room alone in Vegas....You might just be right....

Edited August 29 by fforest

[allwet]

2 hours ago, fforest said:

If you stay in a super budget motel and only watch T.V in your room alone in Vegas....You might just be right....

The daily resort fee in Vegas is more than the room rate of a 3 star hotel in Pattaya.

[Luv2Phuket]

5 hours ago, fforest said:

If you stay in a super budget motel and only watch T.V in your room alone in Vegas....You might just be right....

 

2 hours ago, allwet said:

The daily resort fee in Vegas is more than the room rate of a 3 star hotel in Pattaya.

...and don't even get me started on the price of strippers or hookers!

The "cheap buffets" are also a distant memory in Las Vegas.  

 

[Kickoff]

Yea, try going to Spearment Rhino and spending money there then compare it to a gogo anywhere in Thailand. 

That guy has never gotten bottle service at Hakkasan, Tao, XS, etc.

And the prices of outcalls...

[MaryPoppins]

i did use the term "almost" when making the comparison between Vegas and Pattaya.... point being.... it is not as cheap as it used to be... 

[geezerrb]

20 hours ago, MaryPoppins said:

once the US cuts its interest rates later this year then this may well trigger a further surge of US dollars invested into Thailand due to it been deemed a safe haven, then the baht will further strengthen against the US and all other currencies... the baht has been strong in the past but that was compensated by the low prices set in Thailand, as recent as 2009 the baht was in a  strong cycle.... The prices set now in Thailand make it almost cost effective to stay in the United States in places like Vegas and party rather than go to Pattaya... How long the tourist driven industries can sustain the large drop in the numbers remains to be seen, but my guess would be a poor high season will see many small operators go if they haven't already. shame.... 

A lot of assumptions made, I think you are speculating as there may be another SEA "bubble" Thailand is leading a lot of growth but its partners are already looking shaky in the same SEA bubble and some are already creaking? 

19 hours ago, allwet said:

It’ll be interesting to see how low the Pound goes come October. Buckle your seat belts!

I wonder? If it "crashes" it puts a lot of held assets in danger. where does that leave the asset holders? In their own danger?

19 hours ago, Taa_Saparot said:

Unless its already factored in.

My opinion is, some speculators have and may well try to factor in more of a drop purely because they know there will be a correction that timed correctly they will make even money.

Biggest casino in the world and there are always more losers to make the big winners.

[MaryPoppins]

interesting times ahead...... 

[MaryPoppins]

The baht to get stronger ? 

https://www.pattayaone.news/climb-further-trade-war-heats-up/?fbclid=IwAR1Cs45zj5MBGp_lAShjTV_cR3NRwJ1dnhYt_aY9HHcClLCHcqCdX2AmHc4 

Edited September 3 by MaryPoppins