Chanchai Kultavarakorn, executive chairman of ASL Securities, said that the baht could fall well below 40 per dollar as the Fed raises interest rates and other Asian currencies lose value against the dollar.
Even though the Bank of Thailand raised its interest rate, he said, the baht is likely to hit 40 to the dollar because the Fed doesn’t seem to care about how its actions affect other currencies.
The Fed said it would keep raising rates until inflation falls to its target of 2%, lower than last month’s 8.3%. Rate hikes will continue through 2023.
Other countries are also worried about their currencies falling in value, which has led their financial authorities to intervene in the currency markets or start quantitative easing, which involves putting money into the system to calm down the bond market.
Since so many dollars worldwide exist, no country can stop capital from leaving. Mr. Chanchai said that this hurts the stability of many countries reserve funds and makes currencies fall even more.
If central banks keep raising rates to stop money from leaving the country, it will hurt the economy at home because businesses and borrowers will have to pay more in interest.
The situation could worsen if a country has an economic crisis and has to sell assets cheaply to pay off debt.
Mr. Chanchai said that this situation would be like what Thailand went through during the Asian financial crisis in 1997 when the baht tanked.
Propping up the dollar
He said it was too late in Thailand to stop foreign money from leaving the US because interest rates have been raised so many times, and so much money has already left the country.
Mr. Chanchai said that if Thailand raised its interest rates, it would hurt the country’s economic recovery and only help commercial banks.
“I don’t think Thailand should play the US game because we can’t stop the huge flow of the dollar leaving the country. The US rate needs to be raised more than the Thai rate.
“Until the US cuts its interest rates, the government should keep an eye on the situation,” he said. “Many countries will have problems until then. But the private sector in Thailand is still going strong.
Many companies on the stock market are still making money and growing through domestic and international growth. Foreigners will return to Thailand to invest, making the baht rise in value.
“Every time there is a financial or economic crisis, the same cycle happens. But this time, Thailand’s private sector and foreign exchange reserves are strong.
Since consumers have a lot of debt, raising rates would make costs go up even more and make it harder for consumers to buy things.
Mr. Chanchai said that Thailand should focus on promoting the tourism industry to take advantage of the weakening currency and help the economy recover.
“Thailand is one of the most well-known tourist destinations in the world. He said, “Thailand should make the most of this chance” amid unfavourable economic conditions.