Baht slide slows on Tuesday opening after Monday dive
The baht opened at 36.29 to the US dollar on Tuesday, weakening slightly from Monday’s close of 36.23.
The currency will likely move between 36.15 and 36.45 against the greenback during the day, Krungthai market strategist Poon Panichpibool said.
Poon said that the baht is being pressured as the currency market is in a risk-off state, which supports dollar strengthening and is pushing the gold price lower.
Moreover, concern about China’s Covid-19 situation is prompting foreign investors to sell more assets in emerging markets, potentially weakening Asian currencies including the yuan.
He advised keeping a watch on US Federal Reserve statements as these could trigger currency market volatility. Important moves to monitor were whether and how much the Fed slows its interest rate rises, and the projected ceiling (terminal rate) of the rises.
The market’s view on the Fed’s rate ceiling will affect the US 10-year bond yield. If the market is concerned that the ceiling will rise beyond 5%, both the US and Thai 10-year bond yields will increase, which will prompt foreign investors to sell Thai long-term bonds and pressure the baht to weaken.
Poon said the baht’s weakening on Monday was a lot faster and more severe than he expected, but he predicted that baht weakening may now slow with the resistance level at 36.30 to 36.40.
If that level is breached, the baht’s resistance level would drop to 36.50 to the dollar, he added.
He also advised investors to use hedging tools such as options to manage risks in a highly volatile currency market.