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Thai baht expected to weaken

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. (TNA)