Baht plunges after Pheu Thai politician made BoT chairman

The baht is on course to slip below the key resistance level of 35 to the US dollar after depreciating sharply since government aide Kittiratt Na-Ranong was named the new Bank of Thailand board chairman, raising doubts over the central bank’s autonomy, say analysts.
The baht weakened from 34.02 to the greenback on Friday to 34.37 on Monday after the selection committee for the board chair picked Mr Kittiratt, former deputy prime minister and finance minister, as the fifth chairman.
The Thai currency slid further to 34.7 on Tuesday, then plunged to a three-month low of 34.9 to the dollar early Wednesday, though it recovered to 34.77 later in the day.
At 34.77 to the dollar, the baht has weakened 7.5% this quarter-to-date, in line with the Malaysian ringgit and a 7.4% depreciation of the yen, but much greater than the 2.8% decline of the Chinese yuan.
The South Korean won weakened by 6.6% during the period and the Philippine peso dropped 4.5%, according to Kasikorn Research Center.
“A factor pushing the baht decline is a strengthening dollar, which has gained significantly after Donald Trump won the US presidential election on Nov 5,” said Kanjana Chockpisansin, head of the research, banking and financial sector at the think tank.
Trump’s victory has pressured Asian currencies, led by the yuan.
The prospects of high tariffs under his administration could keep US inflation high, prompting the Federal Reserve to slow the pace of interest rate cuts next year, although the central bank might trim the rate again at its December meeting, she said.
“Another factor for the baht slide is a ‘domestic factor’, leading to fund outflows from the Thai stock and bond markets,” Ms Kanjana told the Bangkok Post, adding this factor could lead the Bank of Thailand to cut interest rates faster than the market anticipated.
Mr Kittiratt, from the ruling Pheu Thai Party, has been a vocal critic of the central bank’s hawkish monetary policy.
Between Oct 1 and Nov 12, 130 billion baht worth of foreign funds flowed out of the Thai stock market, plus another 67 billion baht from the bond market, she said.
Thanomsak Saharatchai, senior assistant managing director for research at Krungthai XSpring Securities, said Trump’s win prompted investors to dump Asian and European assets, buying US assets and Bitcoin instead.
As a consequence, dollar and US bond yields rose sharply and are expected to increase further, putting pressure on the baht to decline, he said.
An analyst at Maybank Securities (Thailand) who requested anonymity shared a similar view, noting 35 baht to the dollar is the key resistance point for the currency now.
The baht is expected to weaken in the fourth quarter, said the analyst, though the pollical situation could be a game changer.
“If the Constitutional Court finds former premier Thaksin Shinawatra guilty on Nov 22 of asserting influence over the Pheu Thai Party, that might cause the baht to fall below 35.5 to the dollar,” said the analyst.