Economic Factors that Determine Currency Exchange Rate between Baht and Yuan

Abstract

    The study aimed to study economic factors which correlated the international currency exchange rate between Thai Baht and Chinese Yuan. The 5 factors included the rate of interest charged on short-term loans made between banks (Interbank Rate: IBR), a measure of how fast a currency loses its value (Inflation Rate: INF), real value of Baht currency (Real Effective Exchange Rate: REER), value of export products between Thailand and China (Export to China: XCN) and price of SET Index (SET Index). The study relied on secondary data collected throughout 60 months, January 2010 to December 2013. The data were analyzed through Multiple Regressions.

     The analysis showed that 4 economic factors affecting the exchange rate included the rate of interest charged on short-term loans made between banks (IBR), real value of Baht currency (REER), value of export products between Thailand and China (XCN) and price of SET Index (SET) at statistical significance of 95%. The rate of interest charged on short-term loans made between banks (IBR) had coefficient correlation of -0.148, a negative correlation. The real value of Baht currency (REER) had coefficient correlation of -0.037, also a negative correlation. The value of exports product between Thailand - China (XCN) had coefficient correlation of 0.009, a positive correlation. The price of SET Index (SET) had coefficient correlation of 0.001, a positive correlation. The inflation rate (INF) which did not have correlation with the currency exchange rate between Baht and Yuan showed no significance.