Baht slide likely to continue this week

THE Thai baht touched a new low against the US dollar last week (July 16,-20, 2018) with Kasikorn Research Center projecting that it should trade in the range of 33.20-33.70 baht to the dollar this week, Thai News Agency reported.

The Thai currency touched the lowest point in 9 months at 33.52 baht to the dollar in tandem with the pressure on Chinese yuan and other Asian currencies amid worries about impact of trade tensions between US and China.

Also weakening the Thai baht was the support the US dollar got from US Federal Reserve’s testimony to the Congress confirming that it will be continuing to raise interest rates the rest of this year.

While the Thai baht was also knocked by net sale of Thai stocks and bonds by foreign investors, it edged up slightly towards the end of last week to close at 33.41 to the dollar, compared to 33.36 a dollar on Friday July 13.

Meanwhile the SET Index continued to rise last week from midweek onwards ending at 1,671.06 points, up 1.68% from the previous week, with average trading volume being  48,176.17 milion baht

The Market for Alternative Investment (MAI) closed at 431.45 points, up 0.48% from the previous week.

Kasikorn Bank projects that the Thai currency will move in a range of 33.20-33.70 a dollar this week and sees Thai SET index getting support at 1,660 and 1,645 points and facing resistance at 1,680 and 1,700 points respectively.

Issues to watch include second quarter results of the Thai listed companies, US economic figures particularly second quarter GDP, the outcome of European Central Bank monetary policy meeting, and PMI Composite Index of both US and Eurozone.

Meanwhile CNBC reported that the dollar held below a one-year high on Friday after US President Donald Trump expressed concern about a stronger currency, although a weakening Chinese yuan reduced risk appetite.

The dollar is poised for a second straight week of gains and has gained more than 5 percent in the past three months on expectations the US central bank will keep raising interest rates in the coming months.

But in a CNBC interview on Thursday, Trump said a strong dollar puts the United States at a disadvantage and that the Chinese yuan “was dropping like a rock”.

“The comments are more likely to, on the margin, stem flows into dollar assets given renewed uncertainty over the US administration’s dollar policy,” ING strategists said.

Against a basket of other currencies, the dollar held at 95.19, just below the one-year high of 95.62 it reached in the previous session.

But risk appetite remained subdued after China allowed the currency to weaken by lowering its daily midpoint fixing. The People’s Bank of China dropped the midpoint for a seventh straight trading day to 6.7671 per dollar on Friday, 605 pips or 0.9 percent weaker than the previous fix of 6.7066.

Friday’s fixing was the lowest since July 14, 2017, and represented the biggest one-day weakening in percentage terms since June 27, 2016.

“The Chinese currency really seems like it might be in play again rather than just catching up with a stronger dollar,” Rabobank strategists said in a daily note.

The Australian dollar was barely changed at $0.7364, recouping losses after dropping nearly half a percent in early trade.

The euro weakened to $1.1639 after Italian bond yields rose.


Top: A currency exchange sign outside a shop. Photo: William Murphy (CC-by-SA-2.0)