The Thai baht caught in the crosshairs of international currencies

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The Thai baht is pulled in opposite directions by factors beyond its control.

The cost of vacationing abroad in Thailand is now increasingly dependent on the currency you want to exchange. The US dollar continues to appreciate on the back of hawkish interest rate hikes by the Federal Reserve and investor preference for the greenback at a time of general instability in world affairs. A dollar is now worth almost 38 baht. According to Kasikornbank Research, there is little the Bank of Thailand can do to stem the rise in the dollar, which is raising the cost of foreign imports and fueling Thai domestic inflation. However, rising foreign tourist arrivals and increasing Thai exports are expected to bring some improvement later in the year. CIMB Thai Bank indicates a likely increase in GDP (gross domestic product) of 3.2% for the whole of 2022.

Meanwhile, the British pound is falling headlong against all major currencies, including the Thai baht. Thai money changers currently offer just 40 baht for one British pound, down from 42 just a few weeks ago. UK Chancellor Kwasi Kwarteng introduced a massive tax cut budget (mainly benefiting the wealthy) to boost economic growth. But the Institute of Fiscal Studies warns the UK will need to borrow an extra £72billion at a time of high inflation everywhere. The independent Bank of England may well raise interest rates dramatically to dampen inflation, but that would make mortgages and other borrowing more expensive in a continuing inflationary spiral.

International financial gurus such as Bloomberg say that it is currently very difficult to predict currency movements. For example, a Russian withdrawal from Ukraine, however unlikely, would immediately have a reducing effect on international oil and gas prices. Thus, the pound would be boosted despite the recent budget. When it comes to the US dollar, some speculators say the greenback’s share of global foreign exchange reserves continues to decline even as the rise of cryptocurrencies threatens mainstream theories. As physicist Stephen Hawking suggested, “The only way to predict the future is to invent it yourself.”


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