Krungthai GLOBAL MARKETS revealed that the baht rate opened this morning at 34.68 baht per dollar. “Appreciation” from the previous day’s closing level of 34.93 baht per dollar. Stay tuned for the results of the Monetary Policy Committee meeting.
Mr. Boon Panichpheboon, Money Market Strategist, Krungthai GLOBAL MARKETS, Krung Thai Bank, revealed that during the previous night the value of the baht had strengthened significantly. (fluctuating in the range of 34.67-34.95 baht per dollar), which is stronger than we evaluated. The baht received support from the strengthening side of the gradual depreciation of the dollar. Including the flow of gold profit sale transactions. After that, the price of gold (COMEX gold contract for December delivery) continued to rise and settled above the level of $2,050 per ounce. After the decline in US 10-year bond yields and the dollar.
On the US stock market side, all technology stocks rose, and all major growth stocks rose, such as Tesla +4.5% and Microsoft +1.1%. After the 10-year bond yield declined in the United States, following the statements of some Federal Reserve officials who began to support the Federal Reserve’s trend to gradually reduce interest rates next year, in addition, stocks in the luxury goods group fell and this is also supported by the Consumer Confidence Index report. Issued by the Conference Board, which improved better than expected, including the spending trend during the Thanksgiving festival that will expand nicely. As a result, the Nasdaq General Index of technology stocks rose +0.29%, while the S&P 500 closed the market +0.10%.
On the European side of the stock market, the STOXX600 fell -0.30%, weighed by selling pressure on shares in branded products Hermes -2.0%, and LVMH -1.8%, which faced cuts to price targets and earnings forecasts from analysts. Amid concerns about global economic trends, especially the Chinese economy, in addition, European stock markets are also facing pressure from statements by European Central Bank officials who continue to support tight monetary policy until the ECB becomes confident that the inflation problem can be controlled.
On the bond market side were statements by some Fed officials who came out in support of the Fed’s trend of gradually lowering interest rates next year. After inflation in the United States slowed further, which encouraged market players to be more confident that the Fed has a chance to cut interest rates by about -1% next year (start cutting interest rates at the meeting that will be held in May of the year Next), which would cause the US 10-year bond yield to continue to decline near the 4.30% level. However, we maintain the same view that we are wary of the risk that the 10-year US bond yield will be more volatile. If the US economic data report comes out better than expected, Fed officials, especially the Fed Chairman, still indicate a willingness to use tight monetary policy for an extended period. However, we believe that the increase in bond yields will provide an opportunity for market players to gradually buy longer-term bonds.
On the currency market side, the value of the dollar gradually declined. After the US 10-year bond yield fell, which also helped support the Japanese Yen (JPY) continued to strengthen near 147 yen per dollar again (the first target of the short trade idea we introduced earlier). Overall, the Dollar Index (DXY) fell closer to the 147 yen per dollar level. 102.7 points (frame 102.6 – 103.3 points) in terms of gold prices. The decline of both the dollar and the 10-year US bond yield helped support the price of gold (Comex gold contract for December delivery) to continue rising and stabilizing above the level of $2050 per ounce. It is closer to the peak it reached this year, prompting market players to gradually start selling gold for a profit, and the flow of transactions is also helping to support the baht’s appreciation.
For today, the important highlights will be the results of the Thai Monetary Policy Committee (MPC) meeting, in which although we and most analysts estimate that the MPC will decide to “hold” the interest rate at 2.50%, there are important issues to follow. It is closely related to the Monetary Policy Committee’s adjustment to economic and inflation forecasts amid uncertainty over the government’s economic stimulus measures and the global economic outlook, which remains very volatile.
On the European side market players will wait and follow. Minutes of the latest European Central Bank meeting to consider monetary policy trends in the European Central Bank and the United States. Market players will wait and see. A report on the growth rate of the US economy in the third quarter, including a report on US crude oil inventories. This may affect the direction of crude oil prices, especially WTI prices, in the short term.
As for the baht’s trend, we accept that the baht has strengthened more than we expected. The main factor comes from the flow of gold profit selling transactions. After gold prices rose near the highest point this year, during the day we estimate that the baht may still receive some support from gold trading flow.
However, the fading may start to slow its rise. During the period in which the market gradually realizes the outcome of the MPC meeting, we estimate that if the MPC begins to signal its willingness to hold off on raising interest rates, a less positive outlook on the economic outlook and higher inflation risks (or a less hawkish view) may lead to Thai bond yields have contracted somewhat. Which will support such images, and foreign investors may gradually sell to take advantage of the decline in Thai bond yields. On the equity side, the decline in Thai bond yields may make Thai stocks more attractive and encourage investors. Foreign investors have gradually returned to buy some Thai stocks. An inconsistent flow of foreign investors’ money (if this actually happens), could cause the value of the baht to slow down and fluctuate sideways.
As the baht continues to rise above the support level we assessed this week, we see the next support level being in the 34.50 baht per dollar range. (It is closer to the year-end target of 34.25 baht per dollar.) The resistance area will be in the range of 34.90-35.00 baht per dollar. Until the market becomes aware of additional new factors, such as the market adjusting its view of the outlook for federal funds rates.
For this period all assets are still in a period of high volatility. Which makes us maintain the advice that entrepreneurs should use a variety of hedging instruments, such as options, to increase efficiency in hedging against exchange rate risks. In addition to using the tools mentioned above, choosing to deal in the local currency is another interesting way to manage exchange rate risk. Entrepreneurs should compare transaction costs and hedging plans before making any decision. Looking at the baht today it is expected to be at 34.55-34.85 baht/$.
#Baht Value #Interest #MPC #BoT
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