Baht, stocks down as dollar climbs
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The Thai baht and Asian currencies weakened against US dollar on Thursday, after the US Federal Reserve pointed to the "solid pace" of growth in the world's top economy, signalling a mid-year rate hike was still in play.
Yet, fears of the first rate hikes in the US since 2006 have dampened the sentiment in stock markets. Asian stocks declined today after the Dow Jones Industrial Average tumbled 1.13 per cent. Though the US rate won't be hiked until mid-2015, investors were concerned about sliding oil prices and impacts on oil and energy companies' earnings.
At 1.31pm, the baht is traded at 32.61 per dollar, against 32.57 yesterday. The Stock Exchange of Thailand index also eased by 1.25 points or 0.08 per cent to 1,591.56 points.
Yet, foreign investors had been net-buyers of Thai shares in the past six trading days, following the European Central Bank's launch of the quantitative easing measure. Yesterday, foreign net-buys totalled Bt3.76 billion.
In a research note, Tisco Securities said that the index could revisit the 2013 peak at 1,650 points next month. Yet, it cautioned that the path towards 1,600 points would not be smooth due to gradual sell by trigger funds.
In Tokyo, the greenback briefly rose above the 118-yen level before settling back at 117.90 yen by midday, still up from 117.53 yen in New York.
The euro weakened to $1.1275 from $1.1284, while it ticked up to 132.93 yen, against 132.62 yen in US trade.
"While the Fed pointed out the risk of low inflation, I don't think it changes the main scenario for a rate hike in mid-2015," Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking, told Bloomberg News.
"With the US headed for tighter monetary policy while other countries are increasing stimulus, the dollar will remain strong."
UOB Research expects the Fed rate normalisation to take place in the second quarter, possibly starting in the June 16-17 meeting.
"But we continue to look for signs whether the Fed is torn between strong jobs data and further decline in headline inflation due to falling oil prices," it noted.
After a two-day meeting, the Fed's policy statement suggested no deviation from its likely course to begin hiking interest rates around the middle of the year - despite a weak eurozone economy, political uncertainty in Greece, and the negative impact of the strong dollar on US businesses.
"The Fed Statement offered few surprises and some subtle changes that keep (its) options open to either begin the tightening later this year of hold off, should conditions not warrant a shift in policy," National Australia Bank said.
On Wednesday, the policy-setting Federal Open Market Committee (FOMC), as expected, left the key federal funds rate near zero, where it has been pegged since late 2008 to support a recovery in the economy.
The Fed "judges that it can be patient in beginning to normalise the stance of monetary policy," the statement said.
The central bank pointed to improved US labour market conditions, with "strong job gains and a lower unemployment rate," and diminishing slack in the market.
The FOMC had inserted the "patient" language in its December statement. Fed Chair Janet Yellen said last month that the description meant the Fed was unlikely to raise interest rates within the next couple of meetings, in January and in March.
The US economy produced a robust five per cent expansion in the third quarter of 2014, and for all of 2014 had the strongest job growth in 15 years, pulling the unemployment rate down to 5.6 per cent in December.
