In the past When the Yen depreciates, travel in Japan feels like a 10-20% reduction, although this is good news for tourists. But this is a serious depreciation of the Yen It is a result of monetary policy. It may also reflect Japan’s confidence problems.
Therefore, the Thai baht has in some periods depreciated to 37.17 baht per US dollar. What problem is reflected? And is Thailand following in Japan’s footsteps?
It is the ‘Yen-Baht’ difference that weakens wages
If you ask how strong is the depreciation of the baht at the moment? Compared to the beginning of this year, the baht depreciated by more than 6.5%, rising to 36.68 baht per US dollar (beginning of the year 34.42 baht per US dollar) and in some periods it still depreciated to 37.17 baht per US dollar. . As for the Yen, it is the first to depreciate. from the region as well
Let’s start with Amornthep Chawala, Executive Vice President Research Office Executive, CIMB Thai Bank (CIMBT) He told Forbes Thailand that in the past, before Covid-19, the value of the baht used to be closely linked to the value of the yen. which had safe haven status in the region At the time, the monetary policy of the United States was being relaxed. Low policy interest rate Thailand has a high current account balance. There is a lot of tourism income. It also has low inflation. This status was similar to the yen, causing the yen to strengthen at that time. The baht also strengthened.
But post-Covid-19, Thailand is no longer a Regional Safe Haven. because tourism income has decreased And the more intense the US inflation, The price of oil has increased because (1) Thailand is in a position of being a net oil importer; This makes the allure of the baht less attractive, including (2) the US policy interest rate is still rising sharply. This makes the difference in policy interest rates between the US and Thailand wider. This makes assets in the country unattractive. This results in capital moving back to the United States. Until showing the value of the yen and the weakened baht is at the top of the list in the region.
*The value of the yen dollar has weakened past 160 yen per US dollar in some periods.
At the same time, it can be seen that Thailand has similar characteristics to Japan in 3 aspects: 1) not raising interest rates suddenly 2) low attraction of a situation of slow economic growth 3) low inflation
inAmornthep Chawala, Executive Vice President Research Office Executive, Thai Bank CIMBin
The Yen faces pressure ‘more than’ the baht, but is also under pressure from the Fed.
side Rung Sanguanruang, Business Promotion Department, Bank of Ayudhya Global Markets (BAE) or Krungsri Revealed to Forbes Thailand that the Yen is facing more pressure than the baht. Partly because Japan’s public debt is at a very high level. You can see that the inflation rate has increased a lot. But the Japanese authorities are still cautious about raising interest rates. For example, the last meeting did not raise interest rates.
In the past At times, the Bank of Japan (BOJ) will appear to support the value of the yen, causing it to slow down some of its depreciation, such as at the end of April. When the Yen depreciated to a level of 160 yen per US dollar. which fell to 154 yen per US dollar, etc., but the effectiveness of supporting the yen is still limited. It can reduce speculators who sell the Yen only for a short time.
in addition The difference between the yen and the baht is the interest rate. Because although the Yen will increase interest rates in the previous period But it is still considered at a low level compared to the rest of the world. Especially compared to the US Federal Reserve (Fed), which has not recently sent a signal to reduce interest rates. In the second half of 2024, because inflation is still accelerating.
In this regard, the Fed’s interest rate trend is an important issue for the market. and this is the main factor causing the value of the yen and the baht still tends to depreciate As capital flows out of the region, investors still think it will take some time before it clearly the Fed will send a signal to cut interest rates.
But if asked what factors will cause the Yen to strengthen? ‘Rung’ assesses that the BOJ must continue to raise the policy interest rate. But I think I will be careful enough. Because Japan has a lot of public debt, which could cause the bond market to crash. and common factors around the world, such as the Fed, if it signals that it will reduce interest rates Final Round of US Bonds The dollar will weaken against all currencies. Yen and baht may appreciate
“Although confidence in the country (Japan) affects currency changes, the Fed has a bigger effect,” said Rung.
inRung Sanguanruang, Business Promotion Department, Bank of Ayudhya Global Marketsin
How far will the baht depreciate? By the middle of this year, will it reach 38.00 baht per US dollar?
Amontep said he was still worriedThe value of the baht may weaken during May and may continue until June, with a chance of reaching 37.50 – 38.00 baht per US dollar. From 2 factors:
1. The second quarter is dividend paying season.
2. Foreign factors
– If the Fed maintains interest rates for a long time For example, in the last period, we saw that the US 10-year bond yield was more than 4.7%. to the US Dollar and cause the dollar to strengthen.
– Lower interest rates This could happen in Thailand if the Monetary Policy Committee (MPC) faces more pressure in June, even if it only cuts 1 or 2 times.To mitigate the economic impact or adjust the balance according to the slower growing economy Investors must be careful of speculative behavior, considering that the direction of interest rates is going down, with a monetary policy that is going against the United States, which could reduce the attractiveness of the currency. Then the baht may weaken from speculation there.
In addition, geopolitical risks must be monitored that could put pressure on the price of oil to increase If it rises to 90-100 USD per barrel, it can cause the baht to weaken. (Because Thailand is an oil importing country)
while the wayKrungsri also estimates that In the short term, the baht may be 37.05 baht per US dollar.This is close to the highest depreciation in 6 and a half months, but the direction is still consistent with the region as in April the baht was not the weakest in the group and was at an average level. There is a win from South Korea that devalues more than Thailand.
But the baht value, compared to the beginning of this year (YTD), is still the weakest in Asia. (excluding Japan), which, if weighted at 80%, is still a result of investors’ expectations of Fed interest rates, which domestic factors will have some impact on.
The direction of the value of the baht has weakened since the beginning of 2024.
Source: Yahoo! Finance
Why does the baht tend to strengthen at the end of the year?
Rung said that In the second half of the year, the baht has an opportunity to strengthen again. From (1) the assumption that the Fed will raise interest rates 2 times this year (less than 4 times as expected at the beginning of the year) on the off chance that interest rates are not cut. So there are very few. You have to wait to see important economic numbers that indicate that inflation is starting to slow down or that the US economy is starting to weaken, which is expected to happen in the second half of the year and (2) the tourism sector is also helping to support the general economy. and acts as a support to the value of the baht
Krungsri expects the value of the baht at the end of 2024 to be in the range of 34.25 – 36.25 baht per US dollar, while at the end of the 4th quarter of 2024 it is expected to be at 35.00 baht per US dollar.
consistent with a point of view CIMB Thai Bank It is estimated that at the end of 2024 the value of the baht will strengthen from (1) tourism income returning at the end of the year and (2) a reduction in interest rates from the Fed Although the reduction is small, people are likely to price in (the market knows) Therefore, the attractiveness of the US dollar will decrease and more attention will be turned to emerging markets At the end of 2024, the value of the baht will be in the range of 36.5-37.00 baht per US dollar.
Finally, the weakening of the baht is also a result of global factors, namely the Fed’s attitude towards interest rate adjustments. and other currencies There is a chance that it will strengthen if there is clarity in the future.
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