The Thai baht is anticipated to weaken further after dropping below 36 against the US dollar on Tuesday, as the Bank of Japan decided to raise interest rates for the first time in 17 years, which did not provide support to Asian currencies.
Kasikorn Research Center (K-Research) mentioned that the market foresees the Federal Reserve maintaining US rates unchanged on Thursday, potentially leading to a stronger dollar.
On Tuesday afternoon, the Thai currency was noted at 36.07 against the greenback, sliding to a two-week low of 36.04 in early trade and closing at 35.98 on Monday, according to Kanjana Chockpisansin, head of research in the banking and financial sector at the think tank.
K-Research forecasts the baht to range between 36.20-30 to the dollar later this week, as per Kanjana’s comments to the Bangkok Post.
Following the Bank of Japan’s increase in the key interest rate from -0.1% to 0%-0.1%, the yen dipped below 150 to the dollar on Tuesday, marking the first rate hike since 2007 after Japan’s major firms agreed to raise wages by 5.28% for 2024 last Friday.
This hike eliminates countries with negative interest rates. The central bank also shifted away from its radical yield curve control for Japanese sovereign bonds and ceased purchasing high-risk assets like exchange-traded funds.
Nonetheless, Ms. Kanjana noted that the modest rate decision by the Bank of Japan did not lift sentiment for other Asian countries as expected.
It is unlikely that additional measures will be introduced at the bank’s upcoming meeting at the end of next month.
Regarding the Federal Reserve, it is anticipated to hold the US interest rate steady on Thursday, potentially causing the dollar to appreciate against Asian currencies, per K-Research.
K-Research also mentioned that the dollar could strengthen if the Fed delays its first rate cut of the year to the latter part or upgrades the US economic growth forecast, exerting pressure for a deeper decline in the baht, potentially reaching 36.30 against the dollar by the week’s end.
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