The US dollar saw a decline as the 10-year US Treasury yield dropped to 4.65% yesterday. Nevertheless, Poon Panitpiboon, a currency analyst at Krungthai Bank, has advised caution regarding the Thai Baht, indicating that it could face downward pressure should the Israel-Hamas conflict escalate, resulting in higher oil prices that adversely affect Thailand’s current account balance.

 

Simultaneously, the flow of foreign funds into the Thai stock market is expected to remain volatile, following the recent pattern of alternating periods of net buying and net selling. Additionally, importers may gradually increase their purchases of US dollars as the Baht strengthens.

 

Given these factors, Poon estimates that the Baht’s resistance level is likely around 37.25 per dollar. It is not anticipated that the Thai currency will weaken beyond 37.50, and there is a possibility of testing the support range of 36.25-36.30, according to Poon.

 

Whether a rising Thai Baht (THB) is good for Thailand can be a complex issue with both advantages and disadvantages. It’s important to note that economic conditions are influenced by a multitude of factors, and the impact of a stronger currency can vary depending on the context and the specific circumstances. Here are some potential effects:

 

Advantages of a Rising Thai Baht:

1. Lower Import Costs: A stronger Baht can lead to lower import costs for Thailand. This benefits consumers as it makes imported goods, including raw materials and technology, cheaper.
2. Inflation Control: A stronger currency can help control inflation by reducing the cost of imported goods and services. This can be beneficial for the overall stability of the economy.
3. Attracting Foreign Investment: A stronger Baht may attract foreign investment, as it reflects economic stability and can increase the purchasing power of foreign investors.
4. Reduced Debt Burden: If Thailand has significant foreign-denominated debt, a stronger Baht can reduce the cost of servicing that debt.

 

Disadvantages of a Rising Thai Baht:

1. Exports Become More Expensive: A stronger Baht can make Thai exports more expensive for foreign buyers, potentially leading to a decrease in demand for Thai products and a negative impact on export-oriented industries.
2. Tourism Impact: A stronger currency can make Thailand a more expensive destination for foreign tourists, potentially reducing tourism revenue.
3. Negative Impact on Local Manufacturers: Export-oriented industries, such as manufacturing, may face increased competition and reduced profitability due to a stronger Baht.
4. Economic Imbalance: A rapid and excessive appreciation of the Baht can lead to economic imbalances, potentially causing challenges for certain sectors of the economy.

 

Ultimately, the impact of a rising Thai Baht depends on various factors, including the pace and extent of the appreciation, the structure of the Thai economy, and government policies. The Thai government and central bank can use monetary and fiscal policies to manage the exchange rate to achieve their economic goals. They often aim for a balance that supports economic growth, controls inflation, and maintains a competitive export sector.

 

It is important to note that the Thai Baht has seen periods of sustained strength against the US Dollar. It follows that a strong Thai Baht cannot be viewed in a vacuum as a solely good or bad thing. However, if you are a foreigner looking to invest in Thai properties, it would serve you well to purchase Thai properties at periods when the Thai Baht is relatively weak as compared to your home currency. This is because you will need to make the purchase in your home currency. If there is any appreciation that was to occur to the Thai Baht subsequently, you will not only enjoy the appreciation in literal price but also the appreciation that happens due to the rise in the exchange rate.

 

The Thai Baht is hovering close to 5-year lows against the USD. This should be something that foreign buyers of Thai property will need to take note of. It could be a good time to enter the Thai property market if that is your immediate to short-term goal. This would allow you to enjoy not just possible capital appreciation but if the Thai Baht starts to appreciate, you will have more of your home currency when disposing of or renting your Thai property.

 

Yours sincerely,
The editorial team at IBP Real Estate Co., Ltd.