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Taiwan Dollar Poised to Win Back Its Premium Over Thai Baht

Taiwan Dollar Poised to Win Back Its Premium Over Thai Baht

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The Taiwan dollar is on the verge of regaining its premium to the Thai baht, after trading at a discount for most of the second half of the year, as the loosening of capital controls by Thailand’s central bank takes effect.

Taiwan Dollar Poised to Win Back Its Premium Over Thai Baht

The median forecast for the Taiwan dollar is 30.5 versus the greenback for the January-March quarter, according to a Bloomberg survey of economists, while the baht is seen trading at 30.6, putting the Taiwanese currency back on track to trade at a slightly higher value than its Southeast Asian peer.

The median Taiwan dollar and the baht are two currencies that have been the closest to parity among Asia’s currencies for two decades, and the premium has typically been in Taiwan’s favor. Lately, amid the fallout from the U.S.-China trade war and global policymakers’ efforts to deal with trade shifts or slowdowns, the baht has strengthened about 9% against the U.S. dollar in the past 12 months, the most among emerging market currencies.

“The Thai baht has benefited from structural factors, such as the current-account surplus, safe-haven flows and gold price movement,” said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. in Singapore. But measures by the Thai central bank to encourage outflows by loosening capital controls “should take effect over time.”

The Bank of Thailand said Tuesday they have plenty of tools at their disposal to curb the baht’s strength and that measures taken so far to curb capital inflows are “baby steps”.

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net;Lee Miller in Bangkok at lmiller@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net, Samson Ellis

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