BEHIND THE NUMBERS
Last week, we saw the baht testing the important support line of 29.66 to the US dollar, which it last touched 18 months ago. It did not last very long, bouncing back rapidly to 29.75 only an hour later. But just to appreciate the significance of the moment, the baht was only an inch away from the historical low of 29.35 reached early in 2008.
The latest round of sharp currency appreciation started early this year _ on Jan 2 to be exact. That morning, the US Senate passed a bill to make permanent the income tax cuts for most American households. This and other measures, for all practical purposes, reduced the size of the dreaded "fiscal cliff" by more than two-thirds. The bill was also readily _ and surprisingly _ passed by the US House of Representatives, effectively putting the US economy back on track with expected gross domestic product (GDP) growth at about 2% this year.
Shortly afterward, global risk appetites improved. As investors were willing to hold fewer dollars and more of other currencies, the baht gained almost a percentage point (0.88%) against the greenback. It also rose against other major currencies by a similar order of magnitude _ 1.6% against the yen, 0.99% against the euro and 0.81% against the British pound.
This article is older than 60 days, which we reserve for our premium members only.You can subscribe to our premium member subscription, here.