Summary · why it matters
Krungthai GLOBAL MARKETS strategists at Krungthai Bank, or KTB, assess the baht's range this week at 33.25 to 33.85 baht per dollar, with the currency's weakening momentum still intact and the risk open that the baht will slide to test the resistance zone of 33.85 baht per dollar. Thai players in the market are awaiting the September CPI inflation report, which is expected to rise to 3.17%, up 0.6% month on month. Core CPI is expected to rise to 1.60%, driven by higher energy prices in September and continued increases in food prices, including meat, vegetables and fruit, due to erratic weather, as well as ready-to-eat food prices following operators passing through costs and the boost from the government's economic stimulus measures. However, the cut in electricity charges will help slow the rise in inflation somewhat. On the Asian side, market players will await an assessment of Japan's economic outlook and the monetary policy direction of the Bank of Japan, or BOJ, through the wage growth report. Most recently, market players estimate the BOJ has about a 93% chance of raising rates one more time this year and may raise rates another two to three times next year. Meanwhile, analysts expect the Reserve Bank of India, or RBI, may raise its policy rate by 0.25%, or 25 basis points, to 5.50%, with a chance of further hikes, after India's inflation remains high and risks rising above the RBI's target range. The rupee has also reversed to weaken near its weakest point of the year again, which could further fuel inflation. The situation in the Middle East remains a key factor affecting the baht's direction through shifts in market players' views on the rate outlook for major central banks, which affects the dollar, long-term bond yields and gold prices, and also directly affects the Thai economy through volatile energy prices, transport costs and shipping freight rates. The baht still faces Two-Way Risk and can move in either direction. In the short term, the baht could continue to weaken if market players gradually raise the odds of a Fed rate hike, whether this year or next, depending on the Middle East situation, remarks from Fed officials and U.S. economic data reports. Recently, the 10-year U.S. bond yield has swung with energy prices tied to developments in the Middle East, with a 30-day correlation averaging above 72% over the past month, meaning the baht cannot clearly reverse to strengthen until market players begin to hope for a ceasefire negotiation between the United States and Iran.
Bank of Japan
Krung Thai Bank Public Company Limited
Raiffeisen Bank International AG