Krungsri Predicts Weakening of Baht and Anticipates Fed’s Signal as Economic Concerns Mount

Krungsri believes that the baht this week will weaken in the range of 35.30-35.90 baht per dollar. Hits weakest level in 10 weeks amid concerns about Thailand’s economic situation. Waiting for the Fed’s signal Interest rates are expected to remain at 5.25-5.50%.

Ms. Rung Sanguanruang, Global Markets Business Promotion Department Bank of Ayudhya Said Public Company Limited or BAY KrungsriestimatebahtThis week there is a tendency to move in the range of 35.30-35.90 baht / dollar compared to last week. The baht closed weak at 35.64 baht/dollar after trading in the 35.44-35.88 baht/dollar range.

The baht hit its weakest level in 10 weeks amid worries about the Thai economy. Meanwhile, the dollar strengthened against most major currencies last week. The dollar index reached its highest point in 6 weeks after the Bank of Japan (BOJ) maintained its highly accommodative monetary policy. The BOJ governor expressed more confidence that the inflation target will be gradually achieved. This is a sign that he will decide to end the negative interest rate policy in the next period. The European Central Bank (ECB) kept interest rates at a record high of 4% as expected.

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However, the ECB chairman expressed his lack of clarity on interest rate cuts in June, while his latest statement removed the message of high inflationary pressures. Furthermore, 4Q23 GDP data from the US came out better than the expectation. But bond yields rose sideways. Foreign investors sold Thai stocks and bonds for a net amount of 11,413 million baht and 1,619 million baht, respectively.
For this week’s overview Krungsri Global Markets Group expects the US Federal Reserve (Fed) to hold interest rates at
5.25-5.50% By the way, healthy economic growth usually makes it difficult for the Fed to lower interest rates. But we note that the strong expansion is taking place alongside a faster than expected slowdown in inflation, with the core PCE index slowing to the Fed’s target in the second half of 2023. This FOMC meeting will therefore convey the Fed’s idea on how it weighs strong growth and slower inflation when considering monetary policy Investors will also follow January data on US non-farm payrolls. This could lead to a turning point in the direction of the dollar.
For domestic factors, Krungsri Global Markets expects that the Ministry of Finance has lowered its GDP forecast for 2023 to grow just 1.8% from the previous expectation of 2.7%, while this year is expected to expand by 2.8% from the which was previously expected. It will grow by 3.2%, weighing on sentiments on baht-denominated assets and capital flows. In terms of exports in 2023, they retreated by 1.0% from the Ministry of Commerce. Exports this year are expected to expand by 1.99% amid the recovery of the electronics sector and trading partners’ food reserves.

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