Baht weakens to 31.77 as dollar gains on war fears

The baht opened at 31.77 against the US dollar, weakening in line with the stronger dollar as safe-haven demand increased amid the war in the Middle East, with markets now watching US employment data and the Federal Reserve’s interest-rate direction.

Dr Kanchana Chokpaisansin, head of research at Kasikorn Research Centre Co Ltd, said the baht opened this morning at 31.77 baht to the dollar, weakening from the previous close of 31.60.

The move was in line with the strengthening of the US dollar amid concerns over tensions in the Middle East, which have encouraged safe-haven buying across global financial markets.

The dollar also drew support from a rise in the yield on the 10-year US Treasury note, which climbed close to 4.14%, after markets scaled back expectations for Federal Reserve rate cuts.

Investors are increasingly concerned that higher oil prices could add to inflationary pressure in the period ahead.

Poon Panichpibool, market strategist at Krungthai GLOBAL MARKETS, Krung Thai Bank, said the baht had gradually weakened overnight and traded within a range of 31.56 to 31.85 per dollar, pressured by the stronger US dollar and reduced expectations of Fed rate cuts.

A key factor is concern that the fighting in the Middle East may drag on, pushing global energy prices higher and increasing inflation risks, which could prevent the Fed from cutting interest rates as much as the market had previously expected.

At the same time, better-than-expected US economic data released recently has provided further support for the dollar.

However, the baht’s depreciation was partly slowed by some profit-taking in the dollar, especially as the Japanese yen weakened towards 158 yen per dollar, prompting market concerns that Japanese and US authorities could signal possible currency intervention.

Across global financial markets, US equities returned to a risk-off mode, with the S&P 500 falling 0.57% and the Nasdaq down 0.26% on concerns over inflation and the Fed’s interest-rate path.

In Europe, the STOXX 600 fell 1.29% amid concerns that the war in the Middle East could affect Europe’s economy and inflation outlook, even as energy stocks rose in line with oil prices.

In the gold market, bullion slipped below US$5,100 per ounce before rebounding back above US$5,000, after coming under pressure from rising bond yields.

Over the next 24 hours, markets will be closely monitoring key US economic data, including:

• non-farm payrolls
• the unemployment rate
• wage growth
• and US retail sales, which will influence expectations for the Fed’s interest-rate path

Krungthai GLOBAL MARKETS expects the baht to move within a range of 31.60 to 31.90 per dollar today. Key factors to watch include developments in the Middle East, foreign capital flows, gold prices and the performance of Asian currencies.

The bank said baht volatility is likely to increase significantly in the near term due to uncertainty over global monetary policy and geopolitical risks.

A key resistance level for the baht is seen at 32 to the dollar, while the short-term range over the next 24 hours is expected at 31.55 to 31.95.