Surging baht prompts expectation of response from Bank of Thailand
The baht opened at 34.78 to the US dollar on Friday, strengthening from Thursday’s close of 35.00 to a six-month high.
The currency will likely move between 34.65 and 34.90 against the greenback during the day, Krungthai market strategist Poon Panichpibool said.
Poon said the baht strengthened quickly as expected after passing its support level of 35.
Upward pressure on the Thai currency is coming from the dipping dollar, gold sales, and foreign purchases of Thai bonds and stocks, he added.
Poon expects that pressure to continue on Friday, especially from gold sales and foreign investors potentially buying more Thai bonds amid the continuous drop in US 10-Year bond yields.
However, he expects the Bank of Thailand will respond to the baht’s sudden rise.
Moreover, investors shorting the baht might start selling the currency as it nears the technical support level of 34.75, which would slow its rise in the short term.
Poon said investors may also be waiting for US labour data this week before adjusting their positions. He forecast the baht could test its resistance level of 34.50 if the data shows a slowdown in US employment. Better-than-expected US data, however, could see the baht weaken and test its resistance level at 35.
Poon advised investors to use hedging tools such as options to manage risks in a highly volatile currency market.
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