BANGKOK, Thailand – Krungthai GLOBAL MARKETS reports that the Thai baht opened at 33.40 per dollar this morning, strengthening from the previous close of 33.75, September 13. The baht is expected to trade within a range of 33.25 to 33.50 per dollar today, with heightened volatility anticipated as markets digest upcoming U.S. economic reports.
Key Insights:
Baht Movement: The baht has appreciated significantly, breaking below the previously estimated support level of 33.50 per dollar. This appreciation follows a slight decline in the U.S. Producer Price Index (PPI) for August, which has fueled market expectations for potential Federal Reserve rate cuts both this year and next.
Dollar and Euro Dynamics: The dollar faces pressure from the strengthening euro, following the European Central Bank’s (ECB) anticipated rate cut to 3.50%. Despite this, the ECB has not indicated further rate reductions, leading markets to speculate that the ECB may not follow the Fed’s lead in aggressively cutting rates. Additionally, an increased risk appetite in U.S. financial markets and profit-taking in gold transactions have further impacted the dollar.
Market Focus: Investors are keenly awaiting the U.S. consumer sentiment index from the University of Michigan for September, which will help gauge the economic outlook. Market participants will also monitor inflation expectations reports for insights into short-term and long-term economic trends.
Outlook:
Baht Forecast: The recent strengthening of the baht could alter previous technical outlooks suggesting potential depreciation. Despite this, Krungthai GLOBAL MARKETS maintains its view that the market’s high expectations for Fed rate cuts could lead to adjustments if the Fed’s updated projections (Dot Plot) do not meet expectations. This could result in higher dollar and 10-year U.S. bond yields, putting pressure on both gold prices and the baht.
Technical Analysis: The daily USD/THB chart shows a bullish RSI divergence, though MACD and Stochastic indicators suggest possible further appreciation of the baht. The baht may oscillate around the 33.30 per dollar level before potentially weakening, contingent on Fed meeting outcomes.
Short-Term Factors: Throughout the day, the baht could receive support from risk appetite in financial markets and ongoing gold profit-taking, though this may be countered by dollar purchases from importers and commodity transactions, such as crude oil.
Market Advisory: Investors should be cautious of volatility as U.S. economic reports, including the consumer sentiment index and inflation expectations, are released, which could influence market perceptions of Fed interest rate trends and dollar movements.
