At least three trading patterns show Thailand’s baht, this year’s best-performing Asian currency, is poised to fall as policy makers step up warnings that its rally to a 16-year high is stretched.
The baht’s 2.3 percent advance this month pushed the 14-day relative strength indicator to 25, data compiled by Bloomberg show. A reading below 30 typically signals a reversal may occur. Trading envelope and stochastics oscillator indicators also suggest the baht’s rise has gone too far.
Central bank Governor Prasarn Trairatvorakul told reporters in Bangkok on April 19 that the baht’s advance has started to move beyond fundamentals, 10 days after he said the rally was “too fast.” Finance Minister Kittiratt Na-Ranong reiterated his call last week for the central bank to cut interest rates to deter inflows to the country’s bond market.
“The baht has overshot my expectations,” Sacha Tihanyi, a Hong Kong-based senior foreign-exchange strategist at Bank of Nova Scotia, which was the second most-accurate forecaster for Asian currencies over the past year, said in an interview on April 19. “Should this trend continue unabated, Thai policy makers will eventually act to take some of the steam out.”
The currency strengthened 1.3 percent last week to 28.67 per dollar, the biggest gain in three months, on speculation the Bank of Japan’s bond purchases will prompt Japanese pension funds and insurance companies to turn to emerging markets for higher returns. The baht touched 28.56 per dollar on April 19, the strongest level since the devaluation during the Asian financial crisis in 1997.
Forecast Weakening
Tihanyi forecasts the baht will fall to 30.4 per dollar by June. The median forecast of 24 analysts surveyed by Bloomberg is for the baht to fall 1.1 percent to 29 per dollar by year- end. Westpac Banking Corp., the most-accurate forecaster for Asian currencies over the past four quarters based on Bloomberg data, predicts the baht will end 2013 at 28.9.
The baht’s 6.7 percent appreciation this year may cause the government to miss its export growth target of 8 percent to 9 percent this year, Kittiratt said on April 18. Overseas shipments fell 5.8 percent in February from a year earlier, the first decline since August, government data showed March 28.
While ruling out imposing capital restrictions, Prasarn told reporters on April 9 that the central bank stands ready to intervene should the currency move against fundamentals.
Prasarn’s comments may “signal policy actions on the way soon,” analysts at Credit Suisse AG led by Ray Farris wrote in a note on April 19. “FX intervention is probably most likely as Bank of Thailand has continued to rule out capital controls.”
Policy Rift
ข่าวด่วน Baht Flashes Sell Signal as Prasarn Sees Froth: Market Reversal
The baht’s 2.3 percent advance this month pushed the 14-day relative strength indicator to 25, data compiled by Bloomberg show. A reading below 30 typically signals a reversal may occur. Trading envelope and stochastics oscillator indicators also suggest the baht’s rise has gone too far.
Central bank Governor Prasarn Trairatvorakul told reporters in Bangkok on April 19 that the baht’s advance has started to move beyond fundamentals, 10 days after he said the rally was “too fast.” Finance Minister Kittiratt Na-Ranong reiterated his call last week for the central bank to cut interest rates to deter inflows to the country’s bond market.
“The baht has overshot my expectations,” Sacha Tihanyi, a Hong Kong-based senior foreign-exchange strategist at Bank of Nova Scotia, which was the second most-accurate forecaster for Asian currencies over the past year, said in an interview on April 19. “Should this trend continue unabated, Thai policy makers will eventually act to take some of the steam out.”
The currency strengthened 1.3 percent last week to 28.67 per dollar, the biggest gain in three months, on speculation the Bank of Japan’s bond purchases will prompt Japanese pension funds and insurance companies to turn to emerging markets for higher returns. The baht touched 28.56 per dollar on April 19, the strongest level since the devaluation during the Asian financial crisis in 1997.
Forecast Weakening
Tihanyi forecasts the baht will fall to 30.4 per dollar by June. The median forecast of 24 analysts surveyed by Bloomberg is for the baht to fall 1.1 percent to 29 per dollar by year- end. Westpac Banking Corp., the most-accurate forecaster for Asian currencies over the past four quarters based on Bloomberg data, predicts the baht will end 2013 at 28.9.
The baht’s 6.7 percent appreciation this year may cause the government to miss its export growth target of 8 percent to 9 percent this year, Kittiratt said on April 18. Overseas shipments fell 5.8 percent in February from a year earlier, the first decline since August, government data showed March 28.
While ruling out imposing capital restrictions, Prasarn told reporters on April 9 that the central bank stands ready to intervene should the currency move against fundamentals.
Prasarn’s comments may “signal policy actions on the way soon,” analysts at Credit Suisse AG led by Ray Farris wrote in a note on April 19. “FX intervention is probably most likely as Bank of Thailand has continued to rule out capital controls.”
Policy Rift