BANGKOK, Thailand – The Thai baht opened on September 19 at 33.40 THB/USD, weakening from the previous day’s close of 33.26 THB/USD. This comes as the market digests Federal Reserve Chair Jerome Powell’s remarks, signaling that further interest rate cuts may not come quickly after the Fed’s first rate reduction in four years by 0.50%.
Poon Panichphibul, Market Strategist at Krungthai GLOBAL MARKETS, explained that the baht has experienced significant volatility, fluctuating between 33.06-33.41 THB/USD. Initially, the baht strengthened as the U.S. dollar weakened, driven by a drop in the 10-year U.S. bond yield and a rise in gold prices. However, after the Federal Open Market Committee (FOMC) decision, the baht reversed course and weakened again.
The FOMC voted, with a split decision (11-1), to lower the interest rate by 0.50%, bringing it to a range of 4.75% to 5.00%. The move was widely expected and marked the first rate cut since 2020. The Fed’s updated “dot plot” indicated a further 0.50% rate cut is likely by the end of the year.
However, Powell emphasized that while rate cuts are intended to ease the economy towards a “soft landing” without causing a recession, the Fed is not in a rush to reduce rates further. This statement caused the U.S. dollar and bond yields to rise, pressuring gold prices and ultimately weakening the Thai baht.
The baht’s depreciation was also influenced by the yen’s decline against the dollar, with the Japanese currency weakening past 143 JPY/USD. As a result, gold prices, which had hit new highs, dropped sharply to around 2,580 USD per ounce.
Looking ahead, a key focus for the market will be the Bank of England (BOE) meeting, where it is expected that the BOE will maintain its policy rate at 5.00%.
In terms of the baht’s outlook, the currency is likely to continue weakening as the dollar strengthens and gold prices fall. The baht’s trading range is expected to fluctuate between 33.30-33.60 THB/USD. Foreign investors may also engage in profit-taking on Thai assets, adding further downward pressure on the baht. (TNA)
