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Thailand’s Baht May See its Worst Drop in Over 21 Years

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Thailand’s Thai baht has dropped to a four-year low this week and is forecasted for its biggest monthly currency drop since July 2000. The Baht’s drop comes as the US dollar gained over the concerns over tapering plans by the U.S. Federal Reserve.

Thailand’s baht, which has been Southeast Asia’s worst-performing currency in 2021, which has dropped over 11%, was at its weakest since July 2017. The US dollar is near a one-year high on worries that the Fed could start hiking interest rates in 2022.

The Bank of Thailand this week left its policy rate unchanged and stood steadfast on the rate despite the tourism-reliant economy being devastated by the government’s closed border policy. A move many analysts believe will help stop the Thai baht’s tumble.

Thailand’s central bank said the Kingdoms’ economy remains extremely fragile and has a very limited capacity to withstand further shocks due to high external dependence amid the pandemic.

In other news, a Reuters poll expects Singapore’s central bank to leave its monetary policy on hold, while the Philippine central bank has promised to continue with accommodating policy settings until its economic recovery plans get fully underway.

Both Singapore and the Philippines have seen new coronavirus surge over the past few weeks.

Thai Baht worst hit currency in Southeast Asian

The index of emerging Southeast Asian currencies is on track for its worst October since March 2020. Indonesia’s rupiah and the Thai baht led regional currencies lower, with a 0.3% drop each.

The US dollar will continue to gain and pressure Southeast Asian currencies if above all the US Federal Reserve moves out of its pandemic-era accommodative stance.

Jeffrey Halley, a market analyst at OANDA believes a disconnect between Southeast Asian and U.S. monetary policy will have negative implications for most of Southeast Asia unless they unwittingly start burning through foreign currency reserves.

As the Delta-Variant of Covid-19 continues to escalate across Southeast Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan were set for its worst quarter since the coronavirus first struck in late 2019.

Most equity markets in the region rose as investors scooped up cheap stocks after the last two days thanks to a China-driven sell-off. Indonesia leads the gains with a 1% jump.

Meanwhile, Indonesia’s parliament approved a US$190 billion budget for next year. Furthermore, a power supply crunch in China due to the demand-supply imbalance of coal has led to factory shutdowns nationwide. Above all causing investors to jitter, which may have a knock-off effect on China-reliant economies.

Source: Reuters

 

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