The recent weakening of the baht is in line with regional currencies because of the strengthening of the US dollar, according to the Bank of Thailand. Chirathep Senivongs Na Ayudhya, spokesman of the central bank, said the baht was now stable after bouncing up and down in the first seven months of the year from market speculation on key economic data of major economies. However, the currency’s volatility is still less than in 2012 and 2013, while its exchange rate is in the middle of the field of the region.
The baht’s volatility in the year was 4.2 % compared with 5.8 % during the same period last year. According to Bloomberg’s website, the baht depreciated from 31.99 per US dollar on Monday to 32.09 on Tuesday and continued falling to 32.147 as of mid September. The current strengthening of the US dollar is because the US economy improved from the first quarter to the second and its economic recovery is definitely better than those of the European Union and Japan. “Germany’s economy contracted by 0.2 % in the same period of time, which is more than what was expected at 0.1 per cent, and Japan’s economy has also shrunk by 7 % because of the increase in its value-added tax,” he said.
The US economy is definitely on the path to recovery, Chirathep believes. The timing of the US interest-rate hike will largely depend on the labour market in terms of the real unemployment rate versus inflation and the shadow employment situation along with how the Federal Reserve members translate and give weight to the latest non-farm payroll figures last month, which were lower than expected. In Thailand, Chirathep said the expected increase in the prices of natural gas for vehicles and liquefied petroleum gas would have a minimal impact on headline inflation. If gas prices were pulled up immediately, it would only push up headline inflation by 0.01 percentage point.
Somboon Chitphentom, senior director of the Regulatory Policy Department at the central bank, has warned retail investors that investment in additional Basel III Tier 2 instruments is riskier than investment in other types of bonds even though the return is on average 0.6-0.7 % point higher than other general bonds. Commercial banks should take care that their customers have sufficient knowledge and financial stability before offering such bonds as an alternative investment channel for them. About Bt62 billion worth of additional Basel III Tier 2 instruments have been issued by commercial banks since the Third Basel Accord regulations went into effect in January last year, he said.