Thai baht strengthens as investors sell dollars
The Thai baht has strengthened over the past six weeks as investors sold US dollars to make profits.
The baht opened at 35.92 baht per US dollar this morning (October 31) in a trend that has seen it retain its strength in recent weeks, Krung Thai Bank currency analyst, Poon Panichpibul said. This is a result of the US dollar facing strong selling pressure, as investors stepped in to make profits. The US stock market meanwhile opened to more risk, receiving news that the performance of registered companies was better than expected.
The rapid strengthening of the Japanese yen to 149.15 yen per dollar due to player profit-taking in the market put pressure on the US dollar, Poon added.
The baht was also continuing to benefit from the volume of gold trading profit-taking. With the price of gold (COMEX gold futures contract for December delivery) fluctuating above 2,000 US dollars per ounce, it is thought like it will swing to above the 2,000 US dollar level.
The rebound of the baht was stronger and faster than currency traders expected, partly supported by the flow of gold trading profit-taking. Also, the rapid reversal of the Japanese yen's strength before the market was informed about the Bank of Japan meeting reflected the recent yen's strength. This could lead to significant volatility in the foreign exchange market, especially if the BOJ does not signal a much tighter monetary policy, which could cause the Baht to soften slightly.
Moreover, the baht's rapid strengthening could be delayed by the flow of gold trading profit-taking and the status of the short US dollar/Thai baht held by some market players and the US dollar buying power of some importers. This could see the baht testing the 35.80 baht per US dollar support zone and should the baht's strength break above this level, there is a chance to test the 35.60 baht per US dollar support zone.
Nevertheless, all assets are still in a period of high volatility due to uncertainty about monetary policy directions, the situation of the escalating war between Israel and Hamas and the pandemic's end. Therefore, Krung Thai Bank recommends that entrepreneurs use a variety of risk management tools, such as currency options, to enhance efficiency in hedging foreign exchange rate risks.
At the same time, choosing transactions in local currency is another interesting way to manage foreign exchange rate risks. Entrepreneurs should compare the costs of transactions and risk management plans before making decisions each time. The baht is expected to be in the range of 35.75-36.00 baht per US dollar today, according to Krung Thai Bank.
