The Thai baht has fell to its lowest level in four years this week and is expected to experience its biggest monthly currency decline since July 2000. The decline in the baht comes as the US dollar has gained amid concerns over the US Federal Reserve’s debt reduction plans.
The Thai baht, which was Southeast Asia’s worst performing currency in 2021, which fell more than 11%, was at its lowest since July 2017. The US dollar is near a high in a year, fearing the Fed would start raising interest rates. in 2022.
The Bank of Thailand this week left its key rate unchanged and has remained steadfast on the rate despite the tourism dependent economy devastated by the government’s closed border policy. A move that many analysts believe will help stop the fall of the Thai baht.
Thailand’s central bank said the kingdom’s economy remains extremely fragile and has very limited ability to withstand further shocks due to heavy external dependence amid the pandemic.
In other news, a Reuters poll expects Singapore’s central bank to leave monetary policy on hold, while the Philippine central bank has pledged to continue accommodating policy settings until its plans economic recovery are fully underway.
Singapore and the Philippines have both experienced a wave of new coronaviruses in recent weeks.
The Thai baht, the most affected currency in Southeast Asia
The Southeast Asian Emerging Currency Index is on track for its worst October since March 2020. The Indonesian rupiah and Thai baht led regional currencies lower, falling by 0 , 3% each.
The US dollar will continue to gain and put pressure on Southeast Asian currencies if, most importantly, the US Federal Reserve emerges from its pandemic-era dovish stance.
Jeffrey Halley, market analyst at OANDA, believes that a disconnect between Southeast Asian monetary policy and that of the United States will have negative implications for most countries in Southeast Asia, unless they unwittingly start to burn foreign currency reserves.
As the Delta variant of Covid-19 continues to ramp up in Southeast Asia, the largest MSCI Asia-Pacific equity index outside of Japan has been set for its worst quarter since the first blow of the coronavirus at the end of 2019.
Most of the region’s stock markets rose as investors recovered cheap stocks after the past two days thanks to a China-led sell-off. Indonesia leads the gains with a jump of 1%.
Meanwhile, the Indonesian parliament has approved a budget of $ 190 billion for next year. In addition, an electricity shortage in China due to the imbalance between supply and demand for coal has resulted in plant closures across the country. Above all, this makes investors shudder, which can have a ripple effect on economies dependent on China.
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