- Thai asset inflows resume as 2015 Fed rate-hike bets fade
- Scramble for dollars peaked with baht at 35-36: Kasikornbank
The rush to buy foreign exchange in Thailand that pushed trading volumes to a two-year high should subside as fading bets for U.S. monetary tightening in 2015 bring stability to the baht, says Kasikornbank Pcl.
The currency has rallied 1.9 percent from a nine-year low of 36.67 a dollar on Oct. 2 as futures traders pencil in March 2016 as more likely for a Federal Reserve rate hike. Foreign-currency trading by commercial banks in Thailand, including spot, swaps and options, rose to $252.5 billion in August, the most since January 2013, according to the latest central bank figures. Importers and some international investors had been “scrambling for dollars” after the exchange rate breached 35-36, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
“Foreign-currency trading will be much less hectic now as the baht has achieved some degree of stability,” said Kobsidthi at the nation’s fourth-biggest lender. “The baht will certainly rebound as some importers and investors will have to cover their short positions.”
The currency dropped 0.4 percent to 35.982 a dollar as of 9:27 a.m. in Bangkok, after climbing 1.6 percent in the past four days, data compiled by Bloomberg show. It slumped 7 percent in the third quarter, the steepest slide since 1999.
Global investors are also returning, purchasing a net total of $77 million of Thai stocks and bonds in the first three days of this week, exchange data show. They pulled $3.4 billion in the third quarter as the economy deteriorated. The World Bank cut Thailand’s 2015 growth forecast on Oct. 5 to 2.5 percent from 3.5 percent, citing China’s slowdown.
The Bank of Thailand lowered its 2015 outlook to 2.7 percent from 3 percent on Sept. 25, the third cut this year, as exports and domestic consumption weakened. The government plans to spend 128 billion baht ($3.6 billion) on economic stimulus measures in the fourth quarter to help boost the economy, Somsak Chotrattanasiri, director at the Budget Bureau, said Oct. 6.
One-month implied volatility in the baht, a measure of exchange-rate swings used in pricing options, has dropped to 8.71 percent from a four-year high of 9.63 percent on Sept. 30. It has averaged 5.65 percent in the past five years.
“The foreign-exchange rate will continue to be more volatile amid the uncertainty over Fed rate policy and the global economic slowdown,” said Tor Indhavivadhana, chief executive officer at Manulife Asset Management (Thailand) Co. “We would like to hedge all of our overseas investments, but that’s very hard to do with high volatility.”