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Baht ‘likely to weaken’ on Fed rate signal

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The baht opened at 33.15 to the US dollar on Thursday, weakening from Wednesday’s closing rate of 32.96.

The Thai currency is likely to move between 33.05 and 33.25 during the day, Krungthai Bank market strategist Poon Panichpibool predicted.

Poon said the baht is likely to fluctuate and weaken as the dollar strengthens after the US Federal Reserve signalled it would raise the interest rate in March to tackle inflation.

However, Poon said, the baht would not weaken much as some investors, especially exporters, would sell the currency when it reaches between 33.20 and 33.30 to the dollar.

Poon said there was speculation whether foreign investors would sell Thai stocks or purchase shares amid a rise in the crude oil price, which might increase the value of energy stocks.

Meanwhile, investors might sell their gold holdings. The baht could strengthen if gold reached $1,820-1,830 per ounce.

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Poon believes the Federal Reserve wants to keep the policy interest rate at 0 to 0.25 per cent. The Fed feels the US economy is recovering, especially the labour market, despite the Omicron situation. The inflation rate is still at 2 per cent, which is higher than the Fed’s target, Poon pointed out.

The currency market is in a risk-on state and again volatile after the Fed’s signal on rising the interest rate. The Fed said it might increase the rate four times, more than the market expected, if inflation goes higher, he said.

The market expects the Fed to increase the policy interest rate to 0.3 per cent in March, with some even thinking it could be 0.52 per cent, Poon added.

Published : January 27, 2022