Bangkok: The Thai baht weakened to its lowest level in 13 months, testing the 33.40 baht per dollar level this morning at 10:17 AM, compared to yesterday's closing level of 33.14 baht per dollar.
According to Thai News Agency, the weakening trend aligns with broader sentiments affecting most Asian currencies, as the US dollar continues its upward trajectory. This trend is buoyed by market expectations that the Federal Reserve may implement two interest rate hikes this year.
The baht is also impacted by the decline in global gold prices, with limited support as investors await the outcomes of the Monetary Policy Committee meeting today. The trading range for today is estimated to be 33.20-33.50 baht per US dollar. Key elements for investors to monitor include the results of the Bank of Thailand's meeting, foreign capital movements, the global gold price direction, developments in the Middle East, and US new home sales figures for May.
Mr. Poon Panichpibul, Money and Capital Strategy Officer at Krungthai Global Markets, Krungthai Bank, noted that the Thai baht continued its decline due to the strengthening US dollar. This was triggered by a risk-off sentiment following significant drops in tech stocks amid concerns over earnings forecasts and high valuations. Positive US manufacturing and services PMI indices for June contrasted with lower-than-expected reports from the Eurozone and the UK, leading to selling pressure on risky assets. As a result, market participants reduced their gold holdings to increase liquidity and mitigate risk.
Despite these challenges, there have been positive developments in the Middle East, with peace negotiations and the recovery of navigation through the Strait of Hormuz helping to alleviate some pressure. Market participants now project a 48% probability of two Fed interest rate hikes this year, which has also led to a gradual decline in crude oil prices.
Mr. Poon added that while the baht may continue to weaken in the short term due to the strong US dollar, the extent of its decline has surpassed expectations. Although the baht's weakening trend is anticipated to persist, a shift towards strengthening could be expected if it breaks through the support zone of 32.00 baht per dollar. The baht's range over the next 24 hours is projected to be between 33.15-33.50 baht per dollar.