Display mode (Doesn't show in master page preview)

11 Nov 2022

Financial Institutions

The Baht strengthens…but close attention must be paid to volatility sparked by several factors, going forward (Current Issue No.3358)


        The Baht recently surged to its highest level in almost three months at THB 35.70 per US Dollar (as of November 11, 2022) – breaking through the THB 36.00 to the US Dollar. The currency strengthened as the US Dollar faced a sell-off following speculation that the US Federal Reserve (the Fed) would be less aggressive with its rate hikes in the Federal Open Market Committee (FOMC)’s upcoming meetings. In fact, Asian currencies including the Baht have appreciated in November 2022 amid rapid changes in investor views on the foreign exchange market, and signals that the Fed may slow its interest rate hikes going forward.

        Compared to the exchange rate movements before the Fed’s meeting in November 2022, the Baht has strengthened by almost 6 percent, lagging behind the South Korean Won which has strengthened by 8.3 percent. It is a clear sign for the appreciation of the two currencies, especially when compared to other Asian currencies that have appreciated in a range of only 1-3 percent. Considering the movements of foreign investment portfolios, it is certain that the stronger Baht in November was in line with investment trends of foreign investors who were net buyers of Thai stocks and bonds. An additional supportive factor is the decision of the US Department of the Treasury to remove Thailand from the monitoring list in its latest report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, published on November 10, 2022.

        KResearch views that the Baht is likely to remain volatile. Thus, business operators and investors should closely monitor the situation and gradually hedge against foreign exchange risks, as upcoming exchange rate movements may be divergent. Additional factors for concern include the Fed’s signals on interest rate trend, US economic momentum and inflation, and overall risks of the global economy.

Financial Institutions