It’s a season of fluctuation and instability within the global financial markets—with fingers pointed squarely at the increased volatility. The Thai baht, in particular, seems to be getting swept up in this financial whirlwind, bearing the brunt of the turmoil. With the U.S Federal Reserve hinting at a potential incline in the benchmark interest rate, the baht’s depreciation appears to be an ongoing trend set to continue in the weeks to come.
Krungthai Global Market’s strategist, Poon Panitchpibun, shed light on the situation’s gravity when he reported that the baht commenced trading on 21st September at 36.25 against the U.S dollar—a significant drop from the previous day’s 36.07 close. This followed a minor strengthening phase where the baht wavered between 35.86 and 36.23 per dollar on the Wednesday night. However, the stronger dollar and heightened U.S 10-year bond yields, prompted by hints from the Federal Reserve regarding a surge in the interest rate seemed to upset this fleeting stability.
Analysts have read these actions as a strategic effort to land softly in the face of a lukewarm U.S economy—an outlook reflected in the revised growth forecasts for the current and coming year. On the flip side, the U.S stock market seems to be grappling with the aftermath of these signals for continuous rate increments, creating a possible extended duration of heightened rates. The federal reserve’s policy statement and projections pushed bond yields up to 4.40%.
Findings from Krungthai Bank’s research unit suggest that the baht’s depreciation could possibly go heavier than anticipated, and the weakness could drag on for longer than expected. This is largely due to the Federal Reserve’s inconsistent intent to sustain the high interest rates throughout an extended period. Market analysts at Krungthai Global Markets foresee the baht even facing upheaval from foreign investor sales in view of the “risk-off-state” financial market outlook.
Historical data shows that the baht’s depreciation nearly approached resistance levels, indicating potential weakness within the range of 36.50 to 37 against the dollar. Despite this, the baht could recover and fluctuate sideways or even surge if the influential factors alter. These market experts predict that the baht may appreciate within the range of 35.80 to 36.
With China’s economic recovery generating doubt and uncertainty hovering over the U.S Federal Reserve’s prospective monetary policy, global equity markets are wrestling with high volatility levels. Solacing during such financial storms often entails leveraging multiple hedging tools to cushion against exchange rate risks—such advice is pertinent to businesses.
Roong Sanguanruang, head of global markets and research at Bank of Ayudhya (Krungsri), unveiled investor anxieties regarding Thailand’s escalating public debt and fiscal strain, especially in the wake of Prime Minister Srettha Thavisin’s plan to greenlight green bonds. With phenomenal depreciation marks of 3.2% this month—the most significant downturn in the region—the baht navigates a tricky path alongside other regional currencies in the sea of a strengthening dollar.
Nevertheless, Roong remained hopeful about the baht’s potential to bounce back following the peak tourism season. Amid the rising uncertainties, Krungsri updated its baht forecast for this year’s end to 35 baht to the dollar, readjusting from the earlier forecast of 34 baht. Evidently, the Thai financial landscape is experiencing some choppy waters—but a steady hand on the tiller could steer the baht back into calmer currents.