SCB: Baht could be closer to 32 next year as US dollar falls

Bangkok Post (29 November 2007)

The baht is likely to appreciate by 4% to 6% against the US dollar in 2008, reaching 32.30 by the end of next year, according to Siam Commercial Bank.

Pakorn Peetathawatchai, an SCB executive vice-president, said interest rates were also likely to turn upward in 2008, with the central bank's one-day repurchase rate rising a half-point to 3.75% starting from the third quarter of next year.

''The trend is for the US dollar to continue to depreciate in 2008,'' he said at an economics seminar held by the bank yesterday.

The baht's projected rise to 32.30 to the US dollar would be 1.50 baht stronger than the rate of 33.80 forecast at the end of this year.

Dr Pakorn said the appreciation would come even with continued intervention by the Bank of Thailand in the currency market to curb baht gains.

The baht, which was quoted at 33.80 to the dollar yesterday, has risen 6.1% since the beginning of the year and 17.6% since the start of 2006 thanks to steady current account surpluses and weakness in the greenback.

Central bank intervention has helped push the country's foreign reserves to $83.5 billion as of Nov 16, excluding another $18.8 billion in net forward contracts.

Dr Pakorn said interest rates would rise by at least 50 basis points in 2008 as the central bank moves to curb rising inflationary pressure.

Domestic interest rates would outpace US rates, he said.

The Federal Reserve was likely to cut its short-term rate further to 3.5% in the first half of 2008 to revive the slowing US economy and ease market tensions over the sub-prime mortgage crisis, Dr Pakorn added.