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Thai baht in 2013 and transferring it in and out of Thailand

Below is an excellent article written by foreign exchange broker Peter Lavelle. There is some well researched information about his thoughts on the Thai baht for 2013.

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5 things that will impact the baht in 2013

Peter Lavelle at foreign exchange broker Pure FX

If you’re an expat in Thailand, chances are you keep an eye on the value of the baht. After all, its value determines what baht total you get when you transfer money into Thailand, as well as what total you get (be that in US dollars, euros, pounds etc.) when you transfer money home. Given that, what I want to look at in this post is: what’s set to affect the baht in 2013? What factors should you look out for when transferring money? And will the baht rise or fall?

1. US Fed stimulus

Impact on the baht: Positive

One thing set to increase the value of the baht in 2013 is the US Federal Reserve’s stimulus program, formerly known as quantitative easing. What this means is that, each month, Fed chairman Ben Bernanke injects $85 billion into the US economy, in an attempt to spur economic growth. Moreover, according to a fresh declaration this month, Bernanke will continue to do so until unemployment in the States falls to 6.5%.

Now, whatever you think about this stimulus (and some people think it does little more than add to the US debt), there’s little doubt it benefits the baht. This is because, in many cases, instead of using these funds to invest in the States as Bernanke intends, investors go elsewhere, seeking higher profits. And so far, one of the biggest beneficiaries of QE-related investment has been Thailand. This helped push up the baht 3.0% in 2012, and could do so next year too.

2. Foreign investment

Impact on the baht: Positive

Related to the point above, the baht could be driven higher next year, as increasing numbers of foreign companies use it as a base from which to expand. This is especially the case with Japanese firms. For example, in November Nissan announced it would plunge 11 billion baht ($359m) into Thailand, to build a second factory there. The same month, Toyota signalled it would increase production there. All that will help drive up the value of the baht.

3. Thai growth

Impact on the baht: Positive

What with all these foreign investment flows coming into Thailand, you might think that 2013 is shaping up to be a good year for Thailand, economically. And if you think so, you’d be right. A recent Bloomberg poll predicts that, Thailand will expand 5.35% this year, with that trend set to continue, compared to just 0.1% in 2011, when the worst floods in a century hit the country. Given that nothing breeds success like success, that could lift the baht.

4. China/Japan conflict

Impact on the baht: Negative

Though the stars seem aligned in Thailand and the baht’s favour for 2013, there are a few outliers. Specifically, the baht could come under pressure if relations between China and Japan blow up. To date, the dispute between the two countries has centred solely on a group of uninhabited islands, known as Senkaku in Japanese, which both countries claim. Yet with foreign policy hawk Shinzo Abe freshly elected in Japan, this could turn into a regional power tussle.

5. Europe’s debt crisis

Impact on the baht: Negative

Last but hardly least, the Eurozone debt crisis could also bring down the baht, because it causes instability, and so deters investment decisions. In particular, the debate next year, will centre on whether Spain needs a bailout, something it’s put off for months, and on elections in Italy, which Silvio Berlusconi has threatened to contest. In addition, the Eurozone as a whole has promised to push ahead with its in-progress banking union.

So which way will the baht go?

As you may have gathered, I think the odds are on for the baht to gain in 2013, as there’s far more in Thailand’s favour than against. Were the baht to fall, it wouldn’t be because of events in Thailand, but global troubles, such as the prospect of war between China and Japan, or a Eurozone breakup. Hopefully though, these global powers have enough sense not to do anything rash, keeping the world (and the baht) on an even keel.