KBank: Baht to hit 34 in Q1

The baht is heading for further consolidation, with 34 baht to the dollar expected by the first quarter of 2014 with the US economy picking up and the Federal Reserve's planned tapering.

If the baht hits 34 to the dollar, it would mark a four-year, three-month low, said Kasikornbank's head of capital markets Thiti Tantikulanan. The bank also forecast the local currency will weaken throughout 2014 gradually, weighed down by several uncertainties in both local and overseas markets.

The US central bank plans to start winding down its US$85 billion monthly asset purchase scheme amid a nascent economic recovery, and the pace of the reduction could become more aggressive if the world's largest economy shows stronger signs of a rebound, he said, which should strengthen the dollar.

The local currency's depreciation is still in line with its regional peers. Based on one month of data, the Indonesian rupiah dipped at the quickest pace in Asia, down 4.4% against the greenback, followed by the baht at 2.8%, Malaysian ringgit at 2.3%, and Singapore dollar, Taiwan dollar, and Philippine peso all down 1%.

"The baht has weakened faster than expected amid the lacklustre local economy. We are likely to revise our projection for the end of 2014 from 33 baht to the dollar as it does not price in the political factor," said Mr Thiti.

He said it is difficult to predict foreign capital flows in the local bond market. Outstanding foreign bond-holding in the market stands at 700 billion baht, the same level as the beginning of the year after peaking at 750 billion baht in April. Foreign bond-holding in the local market skyrocketed from 70 billion baht in 2010, driven by the Fed's easing measures.

Foreign investors in the local stock market have pulled out 170 billion baht net year-to-date.

Mr Thiti forecast 2014 would be the busiest year yet for corporate issuance, at 300-350 billion baht, driven by last month's policy rate cut to 2.25%.

Pongpen Ruengvirayudh, the Bank of Thailand deputy governor overseeing monetary stability, said foreign investors are waiting, but she does not expect they will pull out all their investments even if the country is stuck in a tailspin.

"Developments in January are important as they will indicate which direction the country will take," she said. "There have been some capital outflows recently, but the amount is not excessive."

Share your thoughts

Discussion 1 : 26/12/2013 at 03:21 PM
Guess some one has been listening to me I predicted 3 months ago that the Baht will be 40 to 1 USD by summer The dow is at record high the Thai government is trying to borrow 2.5 trillion baht with no foreseeable way to pay back. The debt load is to high to manage, The rice scheme or scam is a failure good for vote buying but not a money maker. Now talking of issueing a government bond to pay rice farmers? Maybe by spring 40 to 1. But summer for sure So farangs hold off buying that condo in a few months better deal.
Discussion 2 : 26/12/2013 at 12:19 PM
Yes. And, on the flip side, any strengthening of the Baht has always been attributed to the Solomonic superiority of so-called Thai economic fundamentals. As the article underscores, the Baht is propped up by higher interest rates in Asia and the stressed growth in the US. Any modest sign of recovery in the US will spark outflow without second thought.
Discussion 3 : 26/12/2013 at 11:40 AM
Forbes magazine recently forecast that Thailand is headed for a 1997 type crash. Whither the baht then?
Discussion 4 : 26/12/2013 at 09:59 AM
Trying to talk down the bond sale? Pathetic.
Discussion 5 : 26/12/2013 at 08:14 AM
Finally, an honestly detailed financial review not trying to wrongly blame the drop on the current political protests, but on strengthening world economies, and on investors that no longer need a Thailand investment hedge against drops in their own country's economy, although there has been a marked progressive drop in Thailand's financial stability, given the country's ever increasing debt load. With all the debt the country is projected to take on in the next year, Thailand's financial situation becomes more unstable, and of less interest to foreign investors. The attempted bond sales to fund the rice program is a good example of this risk

Back to top

More From Bangkokpost.com