Showing posts with label Monetary. Show all posts
Showing posts with label Monetary. Show all posts

Sunday 4 December 2022

Thai baht soars to six-month high against US dollar

The Thai baht opened at 34.78 against the US dollar today, strengthening from yesterday’s close of 35 to a six-month high.

The baht’s sudden rise is down to the Bank of Thailand’s (BOT) hiking the policy rate by a quarter point earlier this week.

The BOT remains committed to a gradual monetary tightening policy, raising the policy rate from 1% to 1.25% on Wednesday.

Economic growth this year is expected to be at 3.2%, lower than the prior projection of 3.3%, according to the central bank. The BOT also cut its 2023 growth forecast to 3.7% from 3.8%.

Thailand’s currency is facing pressure from the depreciating US dollar, gold sales, and foreign investors possibly buying more Thai bonds amid continuous drops in the US 10-Year bond yields.

Investors might want to sell the baht now as it edges near the support level of 34.75. Once it hits the support level, it could depreciate again.

Although, US labour data coming out this weak could impact the baht’s value. Low employment rates could help the baht but high levels of employment could weaken the baht, so it’s up to investors whether to hold out and see.

Krungthai market specialist Poon Panichpibool advised investors to use hedging tools in the highly-volatile currency market.

Economists have high hopes for the baht in the long run. Capital Market Research Specialist at Kasikorn Bank Kittika Boonsrang predicts…

“I expect the Thai baht to get a high that could be around 33.50 to 34.00 per US dollar by the end of next year.”

The forecast will only be achievable if Thailand pumps up exports and ramps up tourist arrivals, added Kittika.

Other regional currencies have also strengthened against the greenback amid hopes that China will ease up their Covid-19 restrictions.

Currencies have been highly sensitive to the Federal Reserve’s aggressive monetary tightening this year which was designed to fix high inflation rates in the US.


Source - The Thaiger

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Tuesday 1 December 2015

IMF approves China's yuan as elite reserve currency

Chinese Yuan

The International Monetary Fund welcomed China's yuan into its elite reserve currency basket Monday, recognizing the ascendance of the Asian power in the global economy.

 The yuan, also known as the renminbi, will join the US dollar, euro, Japanese yen and British pound next year in the basket of currencies the IMF uses as an international reserve asset.

IMF Managing Director Christine Lagarde called the decision "an important milestone in the integration of the Chinese economy into the global financial system."

"It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems," she added.

The decision by the IMF executive board solidifies China’s ambition to see the government-controlled yuan achieve global status as one of the world’s top currencies alongside the United States, Europe and Japan.

China, the world’s second-largest economy, asked last year for the yuan to be added to the Fund’s Special Drawing Rights basket.

But, while already meeting the SDR criteria for being widely used, as recently as August the Fund considered the currency too tightly controlled to qualify.

However, IMF staff experts in early November said that Beijing had taken the steps necessary for the yuan to be called "freely usable", opening the way for Monday’s decision.
 Lagarde said the yuan’s inclusion in the basket was expected to help China open up further to the world economy.

"The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy," she said.

The unexpected devaluation of the yuan last August received good marks from the IMF as it expanded the currency’s movements based on market forces.

In addition, Beijing announced last week that an initial group of foreign central banks has been allowed to enter the Chinese currency market, which likely will promote further internationalization of the yuan in global trading.

IMF members can use the Special Drawing Rights basket to obtain currencies to meet balance-of-payments needs. The Fund also issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.

The yuan’s entry into the basket takes effect on October 1, 2016.

- Chinese challenges -

======================

China’s central bank welcomed the decision.

"The joining of RMB in the SDR basket also means the international community has greater expectations on China to play an active role in the world economic and financial arena," it said in a statement carried by the official Xinhua news agency.

It puts the Bank of China under pressure to provide more transparency in line with its peers, such as the Federal Reserve and the European Central Bank.

"If part of their policy is to gradually liberalize the capital account and the financial sector, this is setting in motion a process of opening up that cannot be reversed," Angel Udibe, a financial markets expert at the Peterson Institute for International Economics, told AFP.

"It really make the case at home that they need to continue with the process of liberalization."

The composition and weightings of the SDRs basket are reviewed every five years. The last time the currencies in the basket were changed was in 2000, when the euro replaced the German deutsche mark and the French franc.

The value of the SDR is based on a weighted average of the currencies in the basket. With the inclusion of the yuan, the dollar’s weight in the new basket will be little changed from its current 41.7 percent. The euro will be 30.9 percent, the yuan 10.9 percent, the yen 8.3 percent, and the pound 8.1 percent.

The inclusion of the yuan came with the support of the United States, the IMF’s largest shareholder.

Until recently Washington accused China of keeping the yuan artificially low to gain a trade advantage. But in October the US Treasury Department softened its tone, saying that after Beijing’s moves to loosen controls, the yuan "remains below its appropriate medium-term valuation."

Still, the IMF decision risks angering some lawmakers in the US Congress amid fierce maneuvering for the 2016 presidential election.

"With this decision, the IMF is choosing to reward China’s currency manipulation instead of combating it," said Senator Chuck Schumer, a New York Democrat and longtime China critic.

"This decision is an affront to the millions of US workers who have lost their jobs at the hands of China’s rapacious trading practices, and sends a terrible signal to the rest of the world that currency manipulation is acceptable behavior in the eyes of the IMF."
Source: The Nation

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