Thai baht expected to weaken
The baht, which has been strengthening steadily against the US dollar, is
expected to weaken — but only for the short-term — if Japanese and European
central banks hike their interest rates, according to a report by the Thai
Finance Ministry’s Fiscal Policy Office.
The report said there were signs that the Japanese and European central
banks will raise their interest rates while the US Federal Reserve would
maintain its rates at least during the first half of this year. This would
help the baht from rallying at least in short-term.
The baht has jumped nearly 12 per cent over the past year, causing concerns
that the strengthening could hurt the country’s exports.
The US Federal Reserve is scheduled to meet again in May amid signs that it
will lower the interest rate to 4.25 per cent for the remainder of this year
in order to help solve the sluggish US economy. Such an action would help
push the baht to become strong again, the report said.
According to the report, local interest rates which could help stimulate
investment should be at around 3.75-4.25 per cent as the Bank of Thailand is
due to discuss lowering its interest rate. The Finance Ministry will hold a
meeting later after knowing the direction of rates in the country.
Finance Minister Chalongphob Sussangkarn has said that his ministry would
not intervene in the central bank decision on interest rate and that it
would coordinate monetary and fiscal policies in an attempt to boost
Thailand’s economic growth to achieve target at 4.5 per cent in 2007.