Thailand’s Assets Moving Forex Market

How can strengthening Thai assets affect the Forex market? Asian currencies have experienced an enormous boost, ever since Donald Trump was elected as the newest President of the United States, including the Thai Baht.

Today’s highly volatile financials world makes it seem as though anything could happen this year. The thought of investors flocking to Thai assets isn’t as far-fetched as it may first appear.

One Bank of Thailand governor believes it’s happening, that many foreign investors are pumping money into Thai assets for the short-term. There are quite a few decent reasons why this might be good financial advice for individuals and businesses, one market it will definitely affect is the Forex trading market in Thailand.

Why trade Forex and what are the benefits?

Strengthened Reserves

Thai reserves had strengthened from 2007 until 2013 when, even though they started to drop a little bit, they remained firm.

At one point they represented the 12th highest foreign reserves in the world and made the Thai baht and assets an appealing, safe option for investors looking to avoid the volatility elsewhere.

However, as of the 27th of January 2017, Thailand’s treasury reserves have fallen by 85% to 74.9 billion Baht (Bt) from ฿441.3 billion the previous year. The government is trying to claim that reserves are still sufficient, but that might not be enough to convince other investors in both the currency and assets markets.

Increased Money Flow

With major headlines reading:

  • Bank of Thailand Starts Foreign Exchange Regulation Reform
  • The Thai Baht hits a new record high in two years!

A strengthening the Thailand assets from foreign investments, no matter how small, would almost promise an increase in money flowing into the country. That would have a positive effect in strengthening the Thai Baht since many investors would then need to convert their currency to invest and buy shares and stocks.

The Forex market works in pairs. The possibility of the Thai Baht possibly positioned to increase in value would signify other would decrease in retaliation.

This increase could position the Baht as a safe-haven currency, thought this would possibly only last for the short term. On the reverse side of things, the change in money flow is more than likely to increase the volatility and risk of the currency.

Learn how to make money without trading

The Trump Effect

When Donald Trump was elected the newest president, many Asian currencies experienced a massive increase, including the Thai Baht. Toward the end of February, the Baht reached a four-month high of 34.83 USD/THB as uncertainties surrounding Trump’s policies dragged down the value of the US dollar.

In turn, it has provided an increase for many Thai assets that have increased in value alongside the value of the country’s currency.

Both Thai assets and currency can be expected to remain at their current levels, if not, see further growth, so long as some degree of volatility and uncertainty remains surrounding President Trump and the US dollar.

Other Existing Factors

Of course, there are other factors at play to consider. Such as unemployment levels, interest rates, manufacturing output and more will still affect the Forex market in Thailand. The most recent manufacturing reports failed to meet expectations, and we witnessed the Thai Baht fall as a result.

Multiple factors have put off some investors, such as Shell’s recent stake in the Thailand gas field. Looking short-term could be positive but for those investors looking to the long-term for investments in Thai assets, prepare to be a little less enthusiastic.

The Future of the Thai Baht

In 2016, the GDP growth for Thailand was 3.2%, and the growth for 2017 is predicted at 3.3%. The increase in 0.1% represents a stable, growing economy for the following year.

For the Thai Baht, continued growth in the economy should see the currency value rise as well, and this could also see the prediction of strengthening Thai assets true this year too.

A direct correlation exists between Thai assets and the country’s currency working in tandem with one another, and with one growing in value, the other is likely to follow.

Unless there is a massive drop in foreign investment in Thai assets over the next few months, the currency is not likely to experience a significant shift in value in the near future.

Posted by on March 5, 2017
Giovany Hernandez