Thai baht opens weaker at 34.29 to the US dollar

The currency outlook for today is expected to range between 34.10 to 34.40 baht per dollar, according to Krung Thai Bank currency analyst Poon Panichpibul, who explained that the slowdown in the baht’s value was expected and in line with assessments allowing for potential fluctuations within the range of 34.12 to 34.35 baht.

Factors contributing to the weakening side include the overall financial market's risk aversion that favours the gradual strengthening of the dollar.

The downward adjustment of gold prices back to the short-term support zone is expected to prompt some market players to buy gold within that range, and this flow of transactions will also contribute to the baht's weakening.

Krung Thai Bank estimates that the baht may face the risk of further weakening as the dollar begins to strengthen. Gold prices are also retracting closer to a significant support zone. These factors suggest that the baht may become weaker, testing the crucial resistance zone of 34.50 baht per U.S. dollar.

However, this will depend on the US economic data reports. If the ISM PMI or job openings data surpass expectations, reflecting the ongoing strength of the US economy, it might further bolster the dollar's strength, potentially testing the 4% mark for the 10-year US bond yield. Subsequently, market players might gradually reduce expectations of Fed interest rate cuts this year, Poon said.

Moreover, market risk aversion resurfaced as the Thai Stocks index (SET) adjusted upward, testing the resistance zone, and raising the risk that some foreign investors might begin to sell more stocks to take profits.

Similar to bonds, the upward adjustments of US and European bond yields could impact Thai bond yields to adjust upward, creating additional pressure on foreign fund flows in the Thai bond market, he added.

Overall, Krung Thai Bank estimates that the baht should not weaken significantly beyond crucial resistance zones. Some market players might await opportunities to gradually sell the dollar. Likewise, those viewing the baht as potentially strengthening this year might hold their positions. As for the baht's support zone, Krung Thai Bank believes the range of 34.00 to 34.10 baht per dollar remains a critical support zone that the baht might not easily surpass unless there are clear new supporting factors.