The Thai baht is expected to continue strengthening, potentially falling below 31 baht per U.S. Dollar (in a range of 30.85-31.35), according to SCB FM. Krungsri Securities believes that a swift formation of a new government could attract continued inflows of capital.
On February 9, Wachirawat Banchoen, Senior Financial Strategist at Siam Commercial Bank (SCB), noted that the baht strengthened by 50 satang following the election victory of the Bhumjaithai Party, exceeding the expectations of most market participants. He also observed an increase of approximately 2 basis points in the reference interest rate (THOR) and a significant rise in the Thai stock market index.
“The financial market situation reflects improved investor confidence, with expectations that the new government formation will be more stable,” Wachirawat said. “Government policies are likely to be ‘continuous’ as the Bhumjaithai Party will continue to govern following the election, which is positive for market participants. Government policies are expected to be expansionary, potentially including further economic stimulus measures such as a second phase of the ‘Khon La Khrueang’ (Let’s Move Halves) program.”
SCB FM anticipates further baht appreciation, forecasting a range of 30.85-31.35 baht per U.S. Dollar, due to (1) reduced political uncertainty, (2) a rebound in gold prices, (3) the potential for further weakening of the U.S. Dollar index, (4) diminished risks of yen depreciation, and (5) observed capital inflows into the Thai financial market.
Guidance for ‘Exporters and Importers’ on the Baht
SCB FM advises importers that a USDTHB rate of around 30.75-31.25 presents a favorable buying opportunity. The bank believes the Bank of Thailand (BOT) will likely intervene to prevent excessive baht strengthening, as it retains the capacity to influence the currency after avoiding designation as a currency manipulator by the U.S. Treasury Department.
For exporters, SCB FM suggests selling at a USDTHB rate of around 31.50-32.00. Potential factors that could strengthen the dollar, such as a strong U.S. Non-farm payrolls report, or a decline in gold prices, could lead to baht depreciation.
Krungsri Securities Monitoring U.S. Labor Data and Thai Government Formation
The Global Markets Group at Krungsri Ayutthaya Bank anticipates the baht will trade in a range of 31.10-31.70 baht per U.S. Dollar this week.
Looking ahead, Krungsri Global Markets notes that the market will focus on the U.S. January employment data, which has been rescheduled for release on February 11.
The overall U.S. Economy continues to exhibit low job openings and low layoffs, but recent data has raised questions about whether the Federal Reserve may have been too quick to conclude that downside risks to the labor market have eased. This supports the view that weakening labor demand will become more apparent and allow the Fed to implement further interest rate cuts around mid-year under a new Fed chair, with the overall trend for the dollar remaining downward.
the market will assess the landslide victory of the Liberal Democratic Party (LDP) in Japan. This decisive win increases the likelihood that Prime Minister Fumio Kishida will be able to push through his fiscal policies, potentially putting downward pressure on the yen in the near term.
Domestically, Krungsri Ayutthaya Bank’s Global Markets Group states that the market expects political stability following the election results, and a swift formation of a governing coalition could attract continued capital inflows.
