Stock Dimension: Evaluating the Baht’s Movement This Week

Bank of Ayudhya Public Company Limited Global Markets Group evaluates the baht’s movement this week, expecting a trend within the framework of 32.75-33.50 baht/dollar. The baht closed stronger at 33.03 baht/dollar after trading in the range of 33.02-33.52 baht/dollar last week, hitting its strongest level in 19 months.

The dollar weakened against most major currencies except the yen and Swiss franc last week after the Federal Reserve decided to cut interest rates by 50bp to 4.75-5.00%. This marks the first rate cut, indicating the Fed’s growing confidence that inflation will slow to its target. However, the chairman of the Fed stated that he does not see any immediate signs that the US economy is likely to go into recession.

The Bank of Japan (BOJ) kept interest rates at 0.25% as expected, while the market interpreted signals from the BOJ that they were in no rush to raise interest rates yet. Foreign investors bought Thai stocks and bonds for a net amount of 5,865 million baht and 9,975 million baht, respectively.

Krungsri Global Markets Group’s Market Commentary

Krungsri Global Markets Group comments on this week’s market situation, stating that investors will follow comments from Fed officials and August US PCE inflation to further assess the direction of US policy interest rates. The latest Fed estimates reflect that the Fed could cut interest rates another 50bp to 4.25-4.50% at the end of this year, 100bp in 2025, and another 50bp in 2026 to 2.75-3.00%, which would mark the bottom of the cycle.

Meanwhile, the market expects the Fed interest rate to reach 2.85% at the end of 2025, which is a year faster than the Fed’s dot plot, indicating that the dollar may have some opportunity to recover if economic data comes out better than expected. Additionally, the price of gold in the world market will continue to create fluctuations in the value of the baht.

Domestic Matters

The Governor of the Bank of Thailand stated that Thailand does not need to reduce policy interest rates in line with the United States, as it will mainly consider domestic economic factors. The general picture from different aspects is still consistent with that assessed by the BoT. However, the Governor acknowledged that credit quality was at greater risk amid an uneven recovery across economic sectors.

The strengthening baht will affect the profits of the business sector. We believe that the Monetary Policy Committee (MPC) is likely to keep the policy rate at 2.50% in its next meeting on 16 October.