Question

in you own words how do you reconcile the high level of interest rates in Thailand with the expected change of the baht dollar exchange rate according to PPP?

Answer 1

High-interest rates in a country implies that the demand of the countries currency will increase as a foreign investor would like to take advantage of the increased rates of return, it creates an increased pressure on the currency of the country however in Thailand the increased interest rates are due to high expected levels of that inflation therefore thai - bhat should depreciate by the amount to counteract the nominal interest rate between Thailand and US