KBank: Baht appreciation may have peaked in April

• May 17, 2017

The baht probably reached its strongest level in mid-April and will reverse course until the end of the year, says a senior official at Kasikornbank (KBank).
“According to historical data, the baht normally reaches its peak in the middle of April as a result of seasonal factors,” said Kobsidthi Silpachai, head of capital markets research at KBank.
The baht appreciation over the past two months could be attributed to a high current account surplus and rising tourist arrivals to Thailand, he said.
“The Federal Reserve recently signalled it would raise rates three times this year, but the market has already priced in four rate hikes and this also contributed to a weaker US dollar during the period,” Mr Kobsidthi said.
The baht has appreciated 3.5% year-to-date, according to KBank data. It hit a 21-month high of 34.19 to the dollar on April 17, while it was quoted at 34.52 yesterday.
Mr Kobsidthi said May to June is regularly a period when Thai companies pay dividends to shareholders, including foreigners, and this weakens the baht.
A looming Fed rate hike at the upcoming June 14-15 meeting is also adding downward pressure to the baht, he said.
KBank expects the baht to move in a range of 34.40-35.40 in the second quarter.
Mr Kobsidthi said he does not expect significant offshore funds to flow into emerging markets for the rest of this year, though shifting among emerging markets is likely.
KBank forecasts the baht to continue depreciating until the end of the year, to 35.70 against the dollar.
Mr Kobsidthi said the Fed also signalled that it might start to decrease half of its balance sheet worth $2 trillion, which is another factor leading offshore funds to return to the US, thus weakening the baht.
“Foreign investors are holding 630 billion baht worth of Thai government bonds, which would dip if the Fed decides to cut its balance sheet,” he said.
But a possible deal between FWD Group to acquire Siam Commercial Bank’s life insurance operations worth $3 billion could limit the baht’s retreat if it happens this year, Mr Kobsidthi said.
Amonthep Chawla, head of research at CIMB Thai Bank, said he expects the baht to depreciate to 35 against the greenback by the end of the second quarter and to 36 at year-end.
Mr Amonthep said the depreciation assumes a Fed rate hike in June and a possible dip in the Fed’s balance sheet. He said that if Donald Trump delivers on his economic promises, capital outflows from Thailand will quicken.

Source: http://www.bangkokpost.com/business/finance/1250782/kbank-baht-appreciation-may-have-peaked-in-april