Baht still volatile but interest rates steady: Krungsri Bank

The baht is showing a volatile trend, and attention is focusing on the US services sector index, export volumes, and the direction of the Chinese stock market. Krungsri Bank projects local interest rates will remain mostly stable until the end of this year.

According to Poon Panichpibool, Krungsri Bank currency trading analyst, the baht is still fluctuating sideways within the previously estimated range. However, there is a clear decline in the baht's momentum, indicating that it has not been able to weaken beyond the 34.90 baht per US dollar zone.

Additionally, the selling pressure of Thai assets by foreign investors has started to slow. This can be seen from the reversal of foreign investors becoming net buyers of Thai stocks on Friday. However, the direction of foreign investor fund flows should still be monitored as it may affect the short-term volatility of the baht.

Although the depreciation of the Thai baht is limited, the currency is still unable to break the 34.40-34.50 baht/US dollar level as some players in the market, especially importers, are waiting to buy US dollars. This suggests that this zone may continue to serve as a support level for the baht in the near term, Poon said.

Factors affecting the value of the baht

Externally, the baht continues to move in line with the direction of both the US dollar and the price of gold. Key economic indicators reports from the US and jobless figures are awaited.

In the short term, the baht is still influenced by the movement of the Chinese yuan. Therefore, important economic reports from China, such as import and export volumes, inflation rate, and stock market direction, should be closely monitored.

Domestically, the uncertainty of the formation of the government may still be the main factor impacting foreign investor fund flows, especially in the stock market.

For the US, the market will wait to assess the trend of the US economy through the country’s economic indicators reports. In Europe, the market will assess the economic trend of the eurozone through reports on consumer confidence and retail sales. Additionally, the market will follow statements from European Central Bank officials, including the Bank of England.

In Thailand, the market will await the CPI inflation rate report, which, if lower than expected, may lead market players to speculate that the Bank of Thailand (BOT) may conclude its second policy rate hike at 2.00%. Some market players believe that the BOT may raise the interest rate to 2.25%.

Roong Sanguanruang, Director of Business Development and Global Markets at Krungsri Bank, said that the exchange rate for the baht in the upcoming week will fluctuate within the range of 34.20-34.85 baht per US dollar. The Federal Reserve has signalled the possibility of maintaining interest rates during the meeting on June 13-14 to assess the impact on economic activities and inflation trends after the recent interest rate hike.

As for the interest rate outlook in Thailand, the Monetary Policy Committee (MPC) meeting on May 31 left room for the possibility of an interest rate hike.

“However, we remain cautious due to the uncertainty during the Thai government transition period and the lack of clarity in economic policies going forward. Moreover, the actual interest rate trend may turn positive in June, which could result in the MPC maintaining a 2.0% interest rate. This will depend on economic indicators and the pace of government formation,” Roong said.