USD / THB – Industralist wants BOT to start intervention ala BOJ style

The Federation of Thai Industries (FTI) has made an official plea to Bank of Thailand (BOT) to start taking action to bring down the appreciating Baht. This is in response to BOT Governor Trairatvorakul who appeared laissez faire towards the issue, saying that the Baht is in tandem with regional currencies. Following the plea, both BOT and the FTI are scheduled to meet to address their concerns, whether a common understanding can be achieve remains to be seen. However what Trairatvorakul has said isn’t without merit. In 2012, ASEAN bloc remains its position as the largest export partner of Thailand, more than both China and Japan combined, which came in 2nd and 3rd respectively.  Imports see the same 3 names, with Japan coming in first, and ASEAN bloc and China coming in close 2nd and 3rd. Out of all the countries, it appears that Baht is truly appreciating against Yen, and that is after the huge depreciation Yen experienced since September 2012.

Bottomline: Even if BOT maintain current exchange rates, exporters should not be that adversely affected. To truly aid the exporters, BOT have to go tic for tac against BOJ, and certainly Thailand’s GDP and FX reserves are no match for BOJ’s giant guns, making a meaningful depreciation of Baht unlikely in the longer run. Furthermore, the strength of Baht is preventing a common case of inflation flu which ASEAN countries are suffering from no thanks to the FED. Cutting rates and bringing down the Baht may end up hurting the Thais without actually helping them.

Weekly Chart

Price has declined significantly since the turn of the year, with support around 29.60 barely holding on. 30.40 remain as potential resistance against further rallies even if price manage to push higher from here. It is important to note that Baht has appreciated in-line with global positive sentiment, with this week’s US GDP shocker, and FOMC surprisingly dovish statement, doubts are starting to sober up investors, and shaking even the most drunken bulls. Should fear start to creep back in, we could see Baht depreciating back even without Central Bank action.

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