Thai baht nurses losses as cenbank holds rate


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The Thai baht nursed losses on Wednesday

as the central bank held its key interest rate steady to support

economic recovery, while Asian stocks tracked a Wall Street

rally amid fears that aggressive central bank rate hikes could

lead to stagflation.

The baht was down 0.1% after easing 0.2% earlier in

the session following the central bank’s decision. The Bank of

Thailand (BOT), however, raised its forecast for consumer price

index to 6.2% in fiscal 2022, compared with its earlier view of

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4.9%. Thai stocks were up 0.3% after the announcement.

“While the outcome was widely expected, what is surprising

that three of the seven panelists voted for a rate hike in this

meeting, suggesting that the hiking cycle is imminent,” said

Poon Panichpibool, a markets strategist at Krung Thai Bank.

Thailand’s May headline inflation hit its highest level in

nearly 14 years and prices are expected to continue rising. The

consumer price index jumped 7.1% year-on-year, eclipsing the

central bank’s 1%-3% target.

“With the gradual improvement of Thailand’s tourism industry

and current account position, it is only fair that the central

bank considers tightening policy rate in the future,”

Panichpibool said.

Equities in the region gained some momentum, with Taiwan’s

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benchmark index climbing 1% to lead gains, followed by

Indonesia’s, which traded 0.7% higher. Stocks in

Malaysia and India also advanced.

India’s central bank raised the repo rate by 50 basis points

(bps), the second hike in as many months, to combat galloping

inflation, and said the faster pace of monetary policy

normalization in advanced economies had amplified volatility in

financial markets.

The rate hike follows a 40-bp unscheduled rise in early May

that kicked off the central bank’s tightening cycle, which

economists expect to be relatively short.

“We would expect policy interest rates to rise to a point

where by the end of the year, they are at or slightly higher

than the inflation rate. We currently have rates peaking at 5.8%

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in the first quarter of fiscal 2023,” ING analysts wrote in a

note.

Currencies in the region were largely subdued following a

dip in the U.S. dollar, although the greenback managed to hit

its highest level in 20 years against the Japanese yen.

The yen fell 0.6% to lead losses among regional

currencies. The rupiah and the South Korean won

skidded 0.3% each, while the Philippine peso

fell 0.2%. The ringgit and the rupee also fell.

Mounting supply constraints and prospects of demand growth

from China pushed oil prices higher, thereby weighing on the

currencies of the region.

Meanwhile, the World Bank slashed its global growth forecast

by nearly a third to 2.9% for 2022, warning that Russia’s

invasion of Ukraine had compounded the damage from the COVID-19

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pandemic, and many countries now faced recession.

HIGHLIGHTS:

** Japan’s Q1 GDP falls less than first thought on stronger

consumption –

** China to tackle export bottlenecks in bid to boost trade

** Indonesian 10-year benchmark yields rise to 7.101%

Asia stock indexes and

currencies at 0748 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.65 -13.7 <.n2> ! !

China EC>

India -0.07 -4.42 <.ns ei>

Indonesi -0.25 -1.66 <.jk a se>

Malaysia +0.08 -5.15 <.kl se>

Philippi -0.14 -3.62 <.ps nes i>

S.Korea 11>

Singapor -0.05 -1.86 <.st e i>

Taiwan -0.03 -6.21 <.tw ii>

Thailand -0.10 -3.09 <.se ti>

(Reporting by Tejaswi Marthi in Bengaluru; Editing by

Subhranshu Sahu)

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