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Economy and Business - Central bank may further cut policy rate to 0.75 per cent

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Central bank may further cut policy rate to 0.75 per cent

The baht has retreated against the US dollar in recent days, says an analyst at Krungsri Global Markets who expects the central bank to cut its policy rate again to 0.75 per cent from 1 per cent to prop up the declining Thai economy.

Krungsri Global Markets predicted that the baht would move between 31.00 and 31.35/ dollar, from Bt31.6 last week.

The analyst at foreign investors made a net sell of Bt3 billion in the stock market, but a net buy of Bt2 billion in the bond market.

"Thailand bond yield is currently at its lowest level, while the dollar has strengthened against most currencies due to the bright prospects of the US economy and increasing bond yields,” he said. “However, the yen's depreciation is limited amid concerns over impacts of the coronavirus (Covid-19) on the global economy.”

He advised investors to follow the virus situation and the next meeting of the Federal Reserve (Fed).

"The euro has fallen to its lowest level in two and a half years due to dim prospects of the European economy," he said. "During this period, the Thai baht moved in tandem with the yuan and euro currencies."

The official further clarified the situation, saying that the National Economic and Social Development Council (NESDC) had reported Gross Domestic Product (GDP) in the fourth quarter of 2019 expanded only 1.6 per cent year on year, the lowest in five years.

The NESDC has reduced the growth rate projection for this year to 1.5-2.5 per cent from the previous forecast of 2.7-3.7 per cent.

The Ministry of Tourism and Sports estimated that impact from the coronavirus outbreak would reduce the number of foreign arrivals by 5 million, leading to a loss of Bt25 billion in revenue.

Meanwhile, the Bank of Thailand (BOT) said the loss in tourism revenue would account for 1.5 per cent of GDP. When combined with the impact from drought and delay to passage of fiscal budget 2020, the economy is likely to grow below 2 per cent with less than 1 per cent in the first quarter.

Export growth is likely to dip below BOT's expectation of 0.5 per cent, due to the slowdown in China. The 2002 budget is key to stimulate the economy, the analyst said.

In addition, BOT said weakening of the baht, due to the virus outbreak, had dampened drive of the Thai economy and affected investors’ confidence.

The Monetary Policy Committee (MPC) may decide to cut the policy rate further to 0.75 er cent as a signal that all sectors must cooperate to create confidence among investors.

nationthailand.com
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Baht keeps strength despite coronavirus outbreak, economic decline  full article nationthailand.com

The Thai economy in 2020 would expand at a much lower rate than previous forecast and way below its full potential, mainly due to the combined impact from the coronavirus outbreak, delay to enactment of the Annual Budget Expenditure Act and drought on a large number of businesses and employment, according to the minutes released today by the Monetary Policy Committee of the Bank of Thailand

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Baht continues to slide amid increasing worries about Covid-19  full article nationthailand.com

The baht continued to weaken, trading at 31.70 to the US dollar in Monday morning trade, amid concerns over the coronavirus spreading outside China.
Kasikorn Research Centre said that the baht had weakened along with the yuan and other regional currencies amid concerns about the Covid-19 outbreak, after there was an increase in Covid-19 infections outside China.

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Tiggs, I made some very speculative predictions about the GBP/THB rate some months ago. But will the coronavirus have the same impact as SARS on the economies of Asia? Will it trigger the next great collapse?


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Will it trigger the next great collapse?
Like The Tom Yung Crisis - What was the Tum Yum Kung Crisis?  Interesting read full article theculturetrip.com

Many visitors are familiar with the Thai dish tum yum kung (spicy Thai shrimp soup). Some people may be wondering why this popular dish is paired with the word “crisis.” The Tum Yum Kung Crisis was not some shortage of this Thai dish, however. Instead, it was an economic meltdown of sorts, set into motion by a number of different factors in 1997. It was dubbed this particular name because of the heat Thai citizens were feeling during this time, and the stress of this crisis and the financial implications of it led many people to take their own lives. It was the worst economic crisis Thailand had ever seen, and the effects were felt far and wide. People’s salaries were cut in half, jobs were lost, and those who were planning on entering the workforce could not find any jobs, regardless of their skills or previous education.

<a href="http://www.youtube.com/watch?v=xazX-kdT0ng" target="_blank">http://www.youtube.com/watch?v=xazX-kdT0ng</a>
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Will it trigger the next great collapse?
Like The Tom Yung Crisis - What was the Tum Yum Kung Crisis?  Interesting read full article theculturetrip.com

The YouTube is too quick to follow, but the article is fascinating. I had heard of the Tom Yum Kung crisis but never tied it to actual events. It makes sobering reading, and the element that suggests the debt created remains unpaid is particularly notable. Who owns Thailand's debt (and I think we can all guess who).

My personal opinion:

- expats in Thailand have been subjected to almost oppressive levels of control for the last few years (with regulations introduced and then removed, like TM28). These are now being relaxed.

- Thailand is waking-up to the flaws in the "low pay/ high volume" model. Someone else will always have lower paid workers, and this is likely to move to Africa. Technical skills are very different. China has invested in education and skills. Is Thailand in a position to suggest pupils from schools in BKK are at the same level as kids in Shanghai, Seoul, Singapore etc.? A handful of HiSo kids educated at the best international schools will not replace the need for tech-savvy workers.

- "Thai First" is such a terrible step backwards. Rural Thailand should not be a model. "Thai-ness" is not some recognised international standard (there are very few; perhaps the Swiss have a claim - those of us who deal with the Swiss will debate 'Swiss' for many hours! But they are efficient, clean, punctual, polite etc. Thai's cannot claim the same).

Very interesting Tiggs: thank you for posting and reminding of a part of recent history.


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Your welcome CK. - Will the pound ever be set free to wander - as soon as a little rise something will bring it back

Surge in gold exports to limit weakening of baht: analyst

 The baht traded slightly higher in Tuesday morning trade at Bt 31.65 to the US dollar after closing on Monday at Bt 31.69/dollar, Jitipol Puksamatanan, senior director at SCB Securities (SCBS), said.

 He expected the baht to move in a range of Bt31.60 to Bt31.70 against the greenback on Tuesday.

The baht moved up again as export of gold increased, suggesting that Thailand will remain a gold exporter when demand for the precious metal in the market is high. The large volume of gold exported last month partly contributed to a return of Thai exports growth, rising to 3.35 per cent after six straight months of contraction.

As investors rushed to buy safe-haven assets over concerns of Covid-19 spreading outside China, investors are expected to continue to dump Thai stocks, he said. They, however, may buy Thai bonds, so their investment strategy would stabilise the baht value, preventing it from further sliding today.

 US financial markets faced a sell-off on Monday night, as the S&P500 fell 3.35 per cent, while in Europe, the Euro Stoxx and Britain’s FTSE 100, plunged 4.01 per cent and 3.34 per cent respectively. It was their worst performance since August last year. In the global bond markets, the US 10-year yield dipped below 1.40 per cent for the first time since 2016 while the Japanese bond yield also went down to minus 0.09 per cent, the lowest level since November last year as investors worried about the impact of Covid-19 on the economy.

Investors see Japanese bonds and the yen as safe-haven assets. The Australian and New Zealand dollars went down due to decreasing prices of commodities products. This made the US dollar unchanged against other major currencies last night.

nationthailand.com
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Tesco completes China exit with joint venture stake sale

Britain's biggest retailer Tesco TSCO.L has completed its exit from China with the sale of a 20% stake in a joint venture to a unit of its state-run partner China Resources Holdings (CRH), raising 275 million pounds ($357 million).

Having struggled to crack the Chinese market, Tesco established the Gain Land joint venture with CRH in 2014, combining its 131 stores in China with its partner's almost 3,000.

The disposal allows Tesco to further simplify and focus the business on its core operations, it said on Tuesday, adding that the proceeds will be used for general corporate purposes.

After costly exits from Japan and the United States and the sale of its South Korean business, Tesco signaled in December a further retreat from its once lofty global ambitions by starting a review of its remaining Asian businesses, which could result in a sale of its operations in Thailand and Malaysia.

If Tesco does quit Thailand and Malaysia, its only overseas operations, apart from Ireland, will be its central European division, consisting of stores in the Czech Republic, Hungary, Poland and Slovakia.

The Asian exit could be one of the last acts of Tesco's CEO since 2014, Dave Lewis, who will be succeeded by Ken Murphy in October.

($1 = 0.7714 pounds)

(Reporting by James Davey; editing by Kate Holton)

((james.davey@thomsonreuters.com; +44 20 7542 7674))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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U.S. markets plummet, continuing coronavirus-fueled sell-off

The Dow Jones industrial average sank 879 points Tuesday as investors absorbed increasingly worrisome forecasts about the coronavirus, which is spreading faster and more broadly than thought and is renewing recession anxiety. Tuesday brought the Dow's two-day swoon to more than 1,900 points - the worst two-day percentage loss in two years.
The blue chip index went into full retreat after health officials warned it was only a matter of time before the deadly virus becomes a public health threat in the United States. In separate briefings, officials from the Centers for Disease Control and Prevention, the National Institutes of Health and other agencies adopted a markedly different tone about the outbreak, emphasizing they no longer viewed its domestic spread in terms of "if" but rather "when."

"We are finally starting to see the markets react to the coronavirus," said Nicole Tanenbaum, chief investment strategist at Chequers Financial Management. "There has been a lot of complacency in the market and a sentiment-driven rally that hasn't taken into account that this virus may not be as contained as we hoped it would be."

full article nationthailand.com
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Asian markets take another hit as virus quickly spreads full article business.inquirer.net

 A sea of red washed across Asian markets on Wednesday, with the coronavirus spreading rapidly around the world and health chiefs warning that governments were not prepared for the outbreak.

The heavy selling, after a day of relative calm caused by bargain-buying, followed another rout on Wall Street where all three main indexes lost around 3% after officials said COVID-19 would likely take hold in the United States.

With cases being reported in new countries -- and lockdowns in some nations including Austria, Italy and Spain -- traders are growing increasingly fearful about the impact on the global economy.

The death toll is now at more than 2,700 while those infected are approaching 80,000 though new cases in China, the epicenter, are falling.

At the World Health Organization (WHO) headquarters in Geneva, Bruce Aylward, who headed an international expert mission to China, hailed the drastic quarantine and containment measures taken by the country.

But he told reporters that other nations were “simply not ready” for reining in the outbreak, adding: “You have to be ready to manage this at a larger scale… and it has to be done fast.”

WHO said countries must “prepare for a potential pandemic” – a term used to describe an epidemic that spreads throughout the world.

Tokyo stocks ended the morning down more than one percent, having shed more than three percent Tuesday, while Hong Kong lost 0.8 percent and Shanghai fell 0.2 percent.

Sydney, Seoul, and Wellington were all down more than one percent and Manila tumbled more than three percent as it resumed trading after a one-day holiday. Jakarta, Taipei, and Singapore were also well down.
‘Concern of the unknown’

“It’s the concern of the unknown,” David Kudla, at Mainstay Capital Management LLC, told Bloomberg TV. “The question is, is the selling getting a bit overdone or is it a more appropriate response to how far coronavirus has spread, and that eventual impact to the economy.”

With panicking investors rushing into safe havens, the yield on 30-year US Treasury bills are sitting at record lows, while the Japanese yen climbed and the dollar advanced against high-yielding currencies.

However, the dollar was being kept in check by speculation the Federal Reserve could cut interest rates to support markets, though for now, officials are saying the US economy remains in rude health.

Oil prices edged up after three days of steep losses that have wiped about seven percent off both main contracts, though observers warn the virus’s spread to the giant US economy could deal it further pain.
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Baht gains more ground, as US dollar weakens

The baht opened at Bt31.65 to the US dollar on Friday (February 28), strengthening from Thursday’s close of Bt31.75. It is expected to move between Bt31.55 to Bt31.75, SCB Securities senior market strategist Jitipol Puksamatanan said on Friday.

full article nationthailand.com
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Household debt hit Bt13 trillion by end of 2019

Household debt rose 5.5 per cent from the third to the fourth quarters of last year to reach Bt13.24 trillion, the Office of the National Economic and Social Development Council reported on Friday (February 28).

“The ratio of household debt to gross domestic product (GDP) rose to 79.1 per cent, which was the highest in 11 quarters, since the first quarter of 2017,” it said in a report.

“However, household debt in the fourth quarter expanded more slowly than it had in the third, when it grew by 5.8 per cent compared to the second.

“The main reason was Thailand’s slowed economic expansion, which resulted in specialised financial institutions, commercial banks and cooperatives granting fewer loans.”

Non-performing loans (NPLs) for consumption from commercial banks in the fourth quarter amounted to Bt140.57 billion, a 16.7-per-cent increase over the same period of 2018 and representing 2.9 per cent of all loans, up from 2.81 per cent.

Property NPLs rose 3.71 per cent of the total and automotive NPLs 1.86 per cent, while personal and credit card NPLs showed improvement.

The council expects the household debt-to-GDP ratio to continue increasing but at a slower rate and ultimately show a year-on-year increase.

It noted that the Bank of Thailand is formulating measures to control household debt, such as setting a debt service ratio to gear loan amounts to the applicant’s earnings, urging financial institutes to adopt more responsible loan criteria, and promoting financial literacy to help the public budget more wisely.

nationthailand.com
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Baht climbs out of nine-month low against US dollar

 The baht rebounded from a nine-month low, hovering at around Bt31.33 per to the US dollar in Monday (March 2) morning trade

Last week ,Kasikorn Research Centre said the baht had rebounded later in the week, having recouped losses during early to mid-week, after the Thai currency weakened in line with other regional currencies amid growing concerns about the Covid-19 outbreak outside China.

 The baht also fell on net foreign selling orders for Thai stocks and bonds. The baht’s rebound was partly due to position adjustments after it hit a nine-month low of Bt31.93/dollar during the week. On Friday (February 28), the baht closed at Bt31.56/USD, versus Bt31.65/USD on February 21.

During the week of March 2-6, KBank expects the baht to move within a range of Bt31.40-31.90/USD.

 full article nationthailand.com
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CP Group wins with $10.6 billion bid for TESCO operations in Thailand and Malaysia

Thailand’s Charoen Pokphand Group will acquire TESCO’s business in Thailand and Malaysia for $10.6 billion, the company said Monday.

CP sources have told Thai Enquirer that the group’s executives had been camped out in London for days to bid for Tesco’s 1,967 stores in Thailand and 74 stores in Malaysia.

The deal is the largest merger & acquisition deal in Asia this year, according to the Financial Times’ John Reed.

Three of Thailand’s leading families had also made offers to TESCO for the operations.

The 3 families were:

    CP Group owned by the Chearavanont family
    TCC Group owned by the Sirivadhanabhakdi family
    Central Group owned by the Chirathivat family

The acquisition of TESCO Lotus will be a sweet return of an asset that was started by the CP Group in the 1990s but sold at the peak of the economic crisis in 1998/1999 to help the conglomerate keep its other businesses afloat.

The sale price toTESCO was at $180 million in 1998 for 16 branches.

CP Group, which already owns CP All Plc, a 622 billion baht market capitalized company, was the vehicle used to make the offer to Tesco.

CP All already is the operator of 7-Eleven convenience stores across Thailand.

According to the company’s website, it operates 10,268 7-Eleven stores across Thailand with 44% of these being in Bangkok and the rest spread across the country.

CP All also owns Siam Makro Plc, the wholesaler that targets mom & pop shop owners with 123 branches in Thailand and 1 branch in Cambodia.

CP Group has also started its operations in India with Makro style wholesale called LOTS.

CP Group had made a record offer of $6.6 billion to buy back the operations of Siam Makro in April 2013. At that time the company operated 57 Makro stores and 5 Siam Frozen stores. The price offered by CP Group to buy back Makro was at that time considered to be ‘outrageous’ and overpriced.

Analysts have said that concerns anti-trust concerns over CP’s bid were overblown as the anti-trust laws in Thailand are not that strict and that the penalty is a mere 0.5% of the deal which in this case could be around $50 million.

CP Group has in the past said that they were keen on TESCO Lotus as it would complete the distribution chain as they have wholesale (Makro) and convenience store (7-Eleven) but lacked the hypermarket.

thaienquirer.com
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Baht might climb in short term as oil price tumbles

The baht on Tuesday (March 10) opened at 31.43 to the US dollar, and like Monday’s close would move at between Bt31.30 to Bt31.50/USD, SCB Securities senior market strategist Jitipol Puksamatanan said.

“On Monday night, the financial market fluctuated from three factors: the oil price that dropped more than 25 per cent, investors’ concerns about the new coronavirus, and the falling US stocks,” he said.

Within one day, the S&P500 index dropped by 7.6 per cent, while the 10-year Treasury contracted to 0.55 per cent. Besides, the yen strengthened to 102.40 to the US dollar.

The WTI crude oil price was lower by 26 per cent, at $30.20 per barrel, but the price of gold did not increase. “The price was stable at $1678 per ounce,” he added.

“We need to monitor the Asian financial markets today, in the context of the oil price. In the short term, the risk assets at present would be 17 per cent cheaper,” the strategist said.

Meanwhile, the baht, like other Asian currencies, would weaken in the morning but strengthen later as the oil price risk affects it less than other currencies in the emerging markets.

“In the short term, the baht would swing in a narrow range, but it would be more interesting in the long term, like other Asian currencies and those risk assets,” he said.

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Baht weakens as global markets slide

The baht on Friday (March 12) opened at Bt31.85 to the US dollar, weakening from Thursday’s close of Bt31.57, and was likely to move at between Bt31.80 to Bt32.00 per US dollar, SCB Securities senior market strategist Jitipol Puksamatanan said.

“The baht on Friday would weaken in line with the dollar,” he added.

“The market estimated that the Fed would stimulate liquidity in the system. Investors, meanwhile, must monitor the financial policy in Asia in terms of confidence towards investors.”

On Thursday night, the S&P 500 index fell by 9.5 per cent, while the 10-year Treasury contracted to 0.8 per cent. Besides, the WTI crude oil price reduced to $30.90 per barrel, and gold price dropped to $1,575 per ounce.

Brazil’s IBOVESPA financial market crashed by 20 per cent, and they have had to pull the circuit breaker four days this week. Also, the Brazilian currency real weakened by 5 per cent in one day, after the country’s president was infected by Covid-19.

Meanwhile, the European Central Bank has maintained the interest rate at minus 0.5 per cent. The bank chose to grant a loan through targeted longer-term refinancing operations to European entrepreneurs, at the interest rate of minus 0.25 per cent. The bank also has bought more assets worth €120 billion.

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Thai Economic Outlook Among Asia’s Weakest, With Worse to Come



Thailand is preparing to restrict some aspects of daily life after the country’s biggest spike in coronavirus cases, further damaging one of Asia’s weakest economic outlooks.

The steps to be considered Monday include placing more curbs on foreign arrivals, canceling events with big crowds and closing entertainment venues deemed risky for spreading the virus. Confirmed cases jumped by 32 on Sunday to 114, sparking fears of a bigger outbreak and some panic buying of groceries.

The Thai economy was already reeling from a collapse in the critical tourism sector amid lock-downs worldwide to slow the transmission of the disease known as Covid-19. A drought and delayed public spending are additional blows, leaving Thailand with the highest odds of recession among Asian nations -- at 30% -- after Japan, according to data compiled by Bloomberg.

“We may need a sudden stop of economic activity, like China, as it proved effective in tackling the spread,” said Somprawin Manprasert, chief economist at Bank of Ayudhya Pcl, a Thai unit of Mitsubishi UFJ Financial Group. “With such disruption, the economy will likely contract this year.”

Stock Slump

Investors have taken fright, making the benchmark SET equity index emerging Asia’s worst performer with a drop of about 29% so far in 2020. The baht has tumbled almost 6% against the dollar over the same period, the second-largest decline in an Asian basket tracked by Bloomberg.

Prime Minister Prayuth Chan-Ocha’s ruling coalition last week rolled out stimulus steps designed to deliver a near-$13 billion economic boost, but their effectiveness is in doubt after previous packages fizzled.

The Bank of Thailand’s scope to follow in the footsteps of the U.S. Federal Reserve by slashing borrowing costs to near zero, from the current 1%, may be limited by rules making 0.5% an effective lower bound.

full article  bnnbloomberg.ca

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THAI grounds 12 more planes to cut costs amid slump in demand

Thai Airways International Plc (THAI) is grounding 12 planes to reduce operational cost amid the Covid-19 situation.

The airline’s flight demand has fallen by some 30 per cent, Cherdphan Chotikhun, executive vice president of THAI's Technical Department, said.

The 12 planes to be grounded under this plan are: three Airbus A380s -- to be grounded for seven months; six Boeing 777-200s -- to be grounded from Monday (March 16) onwards and will not be recommissioned; an Airbus 330-300 HS-TEU, which has been grounded since March 10; an Airbus 330-300 HS-TES and a Boeing 777-300 HS-TKE -- both will be grounded from Friday (March 20) onwards.

“The Boeing 777-200s will not be used again as they have high maintenance cost up to Bt1 billion,” he added.

This plan will raise the total number of THAI jets grounded to 24; 12 planes were earlier grounded for engine maintenance, resulting in the company having 54 planes in operation from the 80-strong fleet

“Grounding the planes will help the company save on engine depreciation fee, which is usually at $600-$900 or Bt17,000-2,800 per flight hour,” said Cherdphan. “We will also save expenses on crews, pilots and ground services for these planes.”

Last Friday (March 13), the Civil Aviation Authority of Thailand (CAAT) asked the Civil Aviation Board to consider measures proposed by airlines suffering the effects of the Covid-19 outbreak. One proposal is for a 50-per-cent reduction till the year-end in fees charged for landing, parking, office rentals and other services. Others would see the two-week process for approving requests for flight adjustments shortened and passenger-service charges halved to encourage more people to fly.

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Baht weakens as global economies wrestle downturn

The baht opened weaker on Tuesday (March 17) at Bt32.20 to the US dollar, from Monday’s close of Bt32.17.

The baht is expected to move at between Bt32.15 to Bt32.50 per US dollar, SCB Securities senior market strategist Jitipol Puksamatanan said.

On Monday night, the S&P 500 index dropped by 12 per cent, while the US 10-year Treasury contracted by 24 basis points to 0.72 per cent. The price of WTI crude oil decreased by 9.6 per cent, touching $28.69 per barrel.

“The market is highly interested in the co-use of financial policy in large economic groups,” he said. “Meanwhile, the measures to suspend travel and the pressure on people to avoid close proximity with each other is pulling economies in many countries down.”

The Bank of Korea has lowered its interest rate by 50 basis points to 0.7 per cent at an urgent meeting on Monday. In addition, the Bank of Japan has purchased government bonds worth $940 (100 billion yen) within one day, and would buy ETF and J-REIT under the limit of 12 trillion and 120 billion yen, respectively, if the market still fluctuated.

The US dollar weakened on Monday night, in line with the US stock market. Recently, the yen strengthened from 108 yen to 106 yen per US dollar.

“in the next phase, investors have to monitor the global economy. We believe that a closed-country policy would be used more and more, pressuring the baht and risk assets” the SCB strategist said.

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The baht is defying the odds but as Anton said there are vested interests at play and the BoT is not acting for the benefit of the many (and probably never has).