How can we say the baht is rising against the US dollar, as forecast by Kasikornbank (KBank), when it goes from 34.50 to 33.50? If you transfer money from the US to Thailand, like I do, it makes good sense.
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Exchange rates can seem a bit confusing at first. For example, how can we say the baht is rising against the US dollar when it goes from 34.50 to 33.50?
For someone like me, who often transfers money from my US bank account to my Thai bank account, it makes good sense. Suppose at the moment I can buy 34.50 baht with one US dollar, but in the future I may only be able to buy 33.50 baht. Clearly, for me, the baht is becoming more expensive.
The opposite is true for you if you are planning a trip to the US, for example. You will be able to buy more US dollars for your baht.
The exchange rate is affected by many factors and you will see several in the story below. The value of the baht can be a big issue for those exporting goods to the United States and other countries. Unless, they cut the price, their customers could end up paying more and perhaps even reducing their orders or buying from another supplier.
KBank raises baht forecast
SOMRUEDI BANCHONGDUANG
Kasikornbank (KBank) has revised its year-end baht outlook to 33.50 against the US dollar from 34.50 earlier, citing continued offshore capital flows into Thailand.
A wider gap between Thailand's real interest rate and low inflation is the key factor attracting foreign capital, particularly in short-dated Thai bonds, said Kobsit Silpachai, head of the bank's capital market research department.
Foreign holdings of Thai bonds total 700 billion baht, up from 630 billion at the beginning of the year. The influx of offshore funds is firming the baht against the US dollar.
The baht is the top-performing currency in Asia with a 7%-plus gain this year, prompting the Bank of Thailand on Monday to require commercial banks to report additional information in the event of unusually high volume of transfers between non-resident baht accounts, which could involve baht speculation.
"The central bank's move led to the baht weakening marginally by seven satang on Monday," Mr Kobsit said. "The central bank should be more aggressive on foreign exchange management, otherwise the baht will reach 33.20-33.50."
But adjusting policy rates and managing foreign exchange will be insufficient to lower the baht, he said, adding that fiscal policy is needed to raise domestic consumption and fuel inflation to ease the baht's gain.
You can read the full story here: http://www.bangkokpost.com/business/finance/1311343/kbank-raises-baht-forecast
