Thai baht: Rate cut or currency war?

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Thai-bahtAll eyes will be on the Bank of Thailand on May 29 when the monetary policy committee meets to decide on a benchmark interest rate cut to curb the appreciation of the country’s currency, the baht, which has been hurting exports and is threatening to slow down GDP growth.

Thailand’s finance minister Kittiratt Na-Ranong on May 27 called on the central bank cut its benchmark interest rate by at least half a percentage point from the current 2.75 per cent and urged the central bank to take calls for a rate cut “seriously.”

Payungsak Chartsuthipol, chairman of the Federation of Thai Industries, on May 28 also urged the Bank of Thailand to take action as  a policy rate reduction would help stabilise the value of the baht and boost economic expansion.

The current global wave of rate cuts might encourage the Bank of Thailand to join the rest of its peers  like Vietnam, India, South Korea, Australia and Europe to slash their borrowing rates which has been at 2.75 per cent since October, despite the bank saying that it was “under no pressure” to cut the rate and will “review all data and, whatever the resolution will be, will be ready to explain it.”

Since 2012, the baht appreciated more than 6 per cent against to US dollar to touch 28.56, the strongest level since 1997. The baht has been the best performing Asian currency so far, but the country is losing its competitive advantage as a major exporter.

The comparably high rate has led to massive foreign capital in flows due to inundate of cheap money provided by developed nations in form of quantitative easing, most of all from Japan.

On May 28, one day before the Bank of Thailand meeting, the baht was hovering around 29.85 to the US dollar in anticipation of a rate cut.

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Reading Time: 1 minute

All eyes will be on the Bank of Thailand on May 29 when the monetary policy committee meets to decide on a benchmark interest rate cut to curb the appreciation of the country’s currency, the baht, which has been hurting exports and is threatening to slow down GDP growth.

Reading Time: 1 minute

Thai-bahtAll eyes will be on the Bank of Thailand on May 29 when the monetary policy committee meets to decide on a benchmark interest rate cut to curb the appreciation of the country’s currency, the baht, which has been hurting exports and is threatening to slow down GDP growth.

Thailand’s finance minister Kittiratt Na-Ranong on May 27 called on the central bank cut its benchmark interest rate by at least half a percentage point from the current 2.75 per cent and urged the central bank to take calls for a rate cut “seriously.”

Payungsak Chartsuthipol, chairman of the Federation of Thai Industries, on May 28 also urged the Bank of Thailand to take action as  a policy rate reduction would help stabilise the value of the baht and boost economic expansion.

The current global wave of rate cuts might encourage the Bank of Thailand to join the rest of its peers  like Vietnam, India, South Korea, Australia and Europe to slash their borrowing rates which has been at 2.75 per cent since October, despite the bank saying that it was “under no pressure” to cut the rate and will “review all data and, whatever the resolution will be, will be ready to explain it.”

Since 2012, the baht appreciated more than 6 per cent against to US dollar to touch 28.56, the strongest level since 1997. The baht has been the best performing Asian currency so far, but the country is losing its competitive advantage as a major exporter.

The comparably high rate has led to massive foreign capital in flows due to inundate of cheap money provided by developed nations in form of quantitative easing, most of all from Japan.

On May 28, one day before the Bank of Thailand meeting, the baht was hovering around 29.85 to the US dollar in anticipation of a rate cut.

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