INTERNATIONAL

FINANCIAL
MANAGEMENT
VS

FOREX ANALYSIS
GOKULBALAJI S
VS

15010121067
FINANCE B
MBA JULY 2015 17
ALLAINCE SCHOOL OF
BUSINESS
ALLIANCE UNIVERSITY
BANGALORE

TABLE OF CONTENTS
FOREX FUNDAMENTAL ANALYSIS ................................................................................. 2
INTRODUCTION: .............................................................................................................. 2
DEFINITION: ..................................................................................................................... 2
COMMON ECONOMIC INDICATORS INFLUENCING FOREX: ....................................... 2
FUNDAMENTAL ANALYIS OF THAI BAHT: ..................................................................... 3
Thai Bhat ....................................................................................................................... 3
USD ............................................................................................................................... 3
GBP ............................................................................................................................... 3
ROLE OF THE CENTRAL BANK ...................................................................................... 3
FISCAL AND MONETARY POLICY ............................................................................... 3
USD VS THAI BAHT ......................................................................................................... 4
GBP VS THAI BAHT ......................................................................................................... 5
FACTORS FOR CHANGE IN FOREX RATE:.................................................................... 6
Supply and Demand of Currency ....................................................................................... 7
ECONOMIC FACTORS ................................................................................................. 8
REFERENCES ..................................................................................................................... 9

FOREX FUNDAMENTAL ANALYSIS

INTRODUCTION:
In this report we have done the fundamental analysis of forex using
the illustration of following currencies:

THAI BAHT (THB)

US DOLLARS (USD)
GREAT BRITAIN POUND (GBP)

DEFINITION:
Fundamental analysis is the interpretation of economic indicators and
statistical reports. The interest rates, employment reports and the latest inflation indicators
are considered as base for the fundamental analysis.i

Fundamental analysis is the study of economic indicators in an attempt to predict the

future market conditions.
Central Banks are responsible for implementing monetary policy to meet the fiscal
policy objective of the government.
The ability to influence short-term interest rates.
Relationship with corresponding commercial interest rates
Primary monetary tool available for Central Banks.
Economic calendars lists the upcoming data releases as well as the results
expected.i

COMMON ECONOMIC INDICATORS INFLUENCING FOREX:

GDP
CPI
Employment reports
Interest Rates
Yield Curve
PPI
Institute of Supply Management
Retail sales
Industrial Production Index
Commodity Price Index
Trade Balance
Current Account

FUNDAMENTAL ANALYIS OF THAI BAHT:

In this report we have done fundamental
analysis of Thai Baht against US dollar ($USD) and Great Britain Pound (GBP).

Thai Bhat
Thai Baht is the currency of Thailand. The currency is represented as THB.
The sign of Thai Baht is "". The currency is issued by the Bank of Thailand.
It was ranked in 10th position as on OCTOBER 2014 as most frequently used world payment
currency.
Earlier ( before 19th Century), the currency was known as tical.

USD
United States Dollar is the currency of United States of America. The currency is
represented as USD. The sign of USD is $. The currency is issued by Federal Reserve
Bank.
It is a most frequently used world payment currency across the globe with 1st rank.

GBP
The Pund Stering/ Pound is the currency of United Kingdom. The currency is
represented as GBP. The sign of GBP is . The currency is issued by Bank of England.
It is a most frequently used world payment currency across the globe with 4th rank.ii

ROLE OF THE CENTRAL BANK

The Central of a country plays a key role as a serving
authority for the nations financial matters.
Here in this report let us the role of Bank of Thailand, the central bank of THAILAND.

FISCAL AND MONETARY POLICY

THE MONETARY POLICY DECISION MAKING PROCESS:

The bank of Thailand publishes a quarterly monetary policy report to present the latest
economic and inflation forecasts to the Monetary Policy Committee, approximately monetary
policy committee meet eight times a year to assess the economic and financial conditions as
well as the risk factors that may affect the future inflation and economic growth.iii
The monetary policy of Thailand therefore relies on:

The Bank of Thailands Macroeconomic model, which is used make forecasts of

relevant economic variables.
Assumptions regarding external factors, such as expectation of oil prices or growth of
trading partners GDP.

iv

FIGURE1: Monetary Policy Process

Table 1: Economic Indicators

INDICATORS
BSI

As of November 2015
49.1

As of February 2016
48.2

Inflation

106.3

105.54

Interest Rate (Prime Min)

Interest Rate (Prime Max)
Interest Rate (FD Min)
Interest Rate (FD Max)

6.50%
6.85%
1.30%
1.50%

6.50%
6.85%
1.30%
1.50%

USD VS THAI BAHT

Table 2: Exchange Rate of Thai Bhat vs USD

BAHT/USD
BUYING SIGHT
BUYING TRANSFER
SELLING RATE
MID RATE

AS ON
18th NOVEMBER 2015

35.7700
35.8616
36.1731
36.0174

AS ON
18th APRIL 2016
34.80
34.89
35.23
35.06

% CHANGE
-2.75%
-2.75%
-2.64%
-2.69%

On considering the 6 months exchange rate of Thai Bhat with respect to the USD, we see
that there a increase in the value of currency. It is due to various economic and fiscal
measures by the Bank of Thailand, as discussed above.

Let us see the monthly trend of Thai Baht over a period of 6 months for Thai Baht vs USD.

Table 3: Six Months trend of Thai Bhat vs USD

Date

Selling
18-11-2015
18-12-2015
18-01-2016
18-02-2016
18-03-2016

%Change

Buying

35.7990
35.9908
36.1631
35.4272
34.6558

%Change
36.1286

0.53%
0.48%
-2.06%
-2.20%

36.3276
36.4818
35.7581
34.9751

0.55%
0.42%
-2.00%
-2.21%

GBP VS THAI BAHT

Table 4: Exchange Rate of Thai Bhat vs USD

AS ON
18 NOVEMBER 2015

BAHT/GBP

th

BUYING SIGHT
BUYING TRANSFER
SELLING RATE
MID RATE

54.1784
54.3238
55.1809
54.7524

AS ON
18 APRIL 2016
th

49.1235
49.2733
50.1215
49.6974

% CHANGE
-9.79%
-9.76%
-9.62%
-9.69%

On considering the 6 months exchange rate of Thai Bhat with respect to the GBP, we see
that there a increase in the value of currency. It is due to various economic and fiscal
measures by the Bank of Thailand, as discussed above.

Let us see the monthly trend of Thai Baht over a period of 6 months for Thai Baht vs GBP.
Table 5: Months trend of Thai Bhat vs GBP

Date

Selling
18-11-2015
18-12-2015
18-01-2016
18-02-2016
18-03-2016

% Change
54.3238
53.4896
51.4193
50.4032
49.9549

Buying

%Change
55.1809

-1.55%
-3.95%
-2.00%
-0.89%

54.3566
52.2518
51.2890
50.8072

-1.51%
-3.95%
-1.86%
-0.94%

The insights from the news regarding trade and exports are shown below to explain the
changes in exchange rates of Thai Baht against USD and GBP.

FACTORS FOR CHANGE IN FOREX RATE:

vi

As of

TABLE 6: RESERVE MONEY AND INTERNATIONAL RESERVE

1.
2. Net
3. Net
4. Net
International International
Forward
Claims on
Claims on
Financial
Reserve
Reserve
Position
Government Institutions
(billions of
(billions of
(billions of
(billions of
(billions of
US$)
Baht)
US$)
Baht)
Baht)

20 November
2015
27 November
2015
30 November
2015
4 December
2015
11 December
2015
18 December
2015
25 December
2015
30 December
2015

5. Reserve
Money

(billions of
Baht)

156.5

5,587.6

11.5

-105.1

-3,903.2

1,538.9

155.7

5,574.7

11.9

-105.4

-3,876.3

1,550.4

155.7

5,586.0

11.7

-113.2

-3,816.4

1,607.2

156.7

5,610.0

11.8

-143.5

-3,756.4

1,637.9

157.7

5,683.7

11.2

-218.7

-3,746.5

1,593.0

156.9

5,674.0

11.3

-214.4

-3,792.3

1,552.1

157.4

5,677.2

11.4

-173.8

-3,737.9

1,643.5

156.5

5,646.6

11.7

-151.9

-3,678.2

1,713.8

8 January 2016

157.5

5,705.9

10.9

-118.5

-3,867.3

1,585.6

15 January 2016

158.0

5,737.2

10.1

-126.1

-3,872.9

1,601.7

22 January 2016

158.4

5,725.4

9.6

-86.7

-3,962.2

1,574.0

29 January 2016

160.1

5,724.4

9.2

-27.2

-3,978.1

1,650.3

5 February 2016

163.8

5,821.5

9.3

-38.6

-4,013.6

1,661.5

165.6

5,867.9

11.8

-98.9

-4,021.5

1,611.8

167.1

5,961.5

11.5

-54.7

-4,144.9

1,605.8

167.7

5,981.7

10.2

-43.6

-4,185.8

1,648.1

168.0

5,999.1

10.2

-38.4

-4,204.7

1,633.0

4 March 2016

169.6

6,008.0

11.0

-72.4

-4,182.4

1,649.8

11 March 2016

170.9

6,004.8

11.2

-86.0

-4,257.8

1,588.1

18 March 2016

172.8

6,021.1

12.2

-102.6

-4,238.7

1,614.5

25 March 2016

173.1

6,112.0

11.4

-37.1

-4,354.3

1,619.0

1 April 2016

175.5

6,170.2

13.8

5.0

-4,372.3

1,654.9

8 April 2016

176.7

6,214.8

13.4

2.6

-4,419.9

1,627.1

12 February
2016
19 February
2016
26 February
2016
29 February
2016

The International reserve and Reserve Money are calculated as follows:

International Reserve = Gold + Foreign currency reserves + Special Drawing

Rights + Reserve position in the IMF
Net Forward Position = Bank of Thailands forward obligations to buy (+) or
sell (-) foreign currency against Thai Baht
Net Claims on Government = Bank of Thailands lending to Government Governments deposits at the Bank of Thailand and Currency held by
Government
Net Claims on Financial Institutions = Bank of Thailands lending to Financial
Institutions Bank of Thailands borrowing from Financial Institutions
Reserve Money = Notes and coins in circulation + Deposits of financial
institutions at the Bank of Thailand.

The International reserve and Reserve money for Thai Baht for the period Six
months is shown above and the factors had an impact in the fluctuation of Thai Baht
against USD and GBP.

Supply and Demand of Currency

Just like any commodity, the value of a free-floating currency is based on supply and
demand.

To increase a currency's value, the Central Bank can buy currency and hold it in its
reserves. This reduces the supply of the currency available and could lead to an
increase in valuation.

To decrease a currency's value, the Central Bank can sell its reserves back to the
market. This increases the supply of the currency and could lead to a decrease in
valuation.

International trade flows can also influence supply and demand for a currency. When
a country exports more than it imports (a positive trade balance), foreign buyers
must exchange more of their currency for the currency of the exporting country. This
increases the demand for the currency.

ECONOMIC FACTORS
Let us see the external economic factors that had an impact
on Thai Baht Exchange rate against United States Dollar (USD) and Great Britain Pound
(GBP) in the past 3 Months, are as follows:

In January, manufacturing production dropped 3.3% over the same month last
year, which contrasted the 1.3% increase observed in December and marked
the lowest reading since November 2014vii.

On a monthly basis, manufacturing output dropped 4.8% in seasonallyadjusted terms, which contrasted the 2.5% increase tallied in December and
marked the lowest reading in over three years. Moreover, annual average
growth in industrial production decreased from 0.4% in December to a flat
reading in January.

In January, the trade balance recorded a USD 200 million surplus, which
contrasted the USD 400 million deficit observed in the same month of the
previous year and undershot the USD 1.5 billion surplus registered in
December.

In February, consumer prices increased 0.15% over the previous month,

which contrasted the 0.26% decrease seen in January and marked a fourmonth high.

In February, the trade balance recorded a USD 5.0 billion surplus, which was
above the USD 400 million deficit observed in the same month of the previous
year and the USD 200 million surplus registered in January.

The fiscal stimulus measures undertaken by the government are welcomed by

businesses, however, there is uncertainty regarding whether this will be
enough to shore up a recovery amidst a weak external sector. Economic
panellist expects the economy to grow 3.1% in 2016, which is unchanged
from last months estimate. The panel projects growth of 3.4% in 2017.

At its 23 March monetary policy meeting, the Bank of Thailand (BoT) decided
unanimously to keep the one-day repurchase rate at 1.50% as the markets
had expected.

REFERENCES

https://www.oanda.com/forex-trading/learn/intro-to-currency-trading/fundamental-analysis/

ii

http://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp

iii

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/Pages/DecisionProcess.aspx

iv

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/Pages/DecisionProcess.aspx

https://www.bot.or.th/English/MonetaryPolicy/EconomicConditions/EconomicIndices/Pages/default.as
px
vi

https://www.bot.or.th/English/MonetaryPolicy/EconomicConditions/ReserveReport/Pages/Press_wee
kly.aspx
vii

http://www.focus-economics.com/countries/thailand