Mr. Boon Panichphepon, Capital Markets Strategist, Krungthai GLOBAL MARKETS, Krung Thai Bank He revealed that the baht opened this morning at 36.38 baht per dollar, “lower” than the previous day’s closing level of 36.29 baht per dollar.
During the previous night the value of the baht fluctuates in a way that gradually decreases. (fluctuations in the range of 36.23-36.41 baht per dollar) with a weak trend following the risk situation in the financial market from the still hot war situation between Israel and Hamas. This encourages the dollar to gradually rise due to the demand for safe assets, and at the same time concern about the effects of the war. Including the overall picture of the US economy. This still looks good and this is making market players concerned about the trend that Fed interest rates may remain high for an extended period (higher for longer), causing the US 10-year bond yield to rise to 4.90% again. However, the depreciation of the baht has decreased. The flow of gold trading transactions also slowed. After the price of gold continued to rise due to the risks of war.
The S&P 500 fell more than -1.34% amid pressure factors including 1) the war situation between Israel and Hamas that is likely to intensify and escalate, 2) concern over the earnings outlook of chipmakers like Nvidia after the US officially announced a plan to suspend chip exports. to China, and 3) concerns about the Fed’s tendency to keep interest rates at a high level for an extended period. From reports of still bright US economic data and the effects of the war that may cause oil prices to rise. Which affects the trend of inflation slowdown
In terms of European stocks, the STOXX 600 index fell by more than -1.05% amid concerns about the developing war situation. Moreover, the European stock market was also under pressure due to reports of profits of listed European companies that were worse than expected. . Especially technology stocks in the semiconductor group such as ASML, -3.4% European stock markets are still receiving some support from the increase in energy stocks BP, +0.5% after crude oil prices rose in the wake of concerns about the war situation.
On the bond market side the latest US economic data report is still coming out bright. Including the trend of crude oil prices to continue to increase. If the war situation escalates, it may even affect the inflation trend and this is a reason for market players to remain concerned about the Fed’s tendency to keep interest rates at a high level for a long period. Although the atmosphere in the financial market is clearly risk-averse, the 10-year US bond yield could gradually rise to 4.90%. This is due to the volatility of the long-term US bond yield, and during this period, it did not go out. About what we expected. Which we keep to the same advice that investors can gradually buy on dips when bond yields rise, because the return on risk of holding long-term bonds during rising yields is worthwhile and interesting.
On the one hand, the currency market turned and the dollar strengthened. Compared to major currencies The Dollar Index (DXY) rose near the 106.5 point level (range 106.1-106.7 points) with the value of the dollar rising in line with the views of market players who remain concerned about the possibility of the Fed keeping interest rates at a high level for a year. Long time and need to hold the dollar as a safe haven asset during wartime market fears. In terms of the gold price, although both the dollar and the US 10-year bond yield were able to rise, the price of gold (comex gold contract for delivery in December) is still supported by the demand to hold gold as a safe-haven asset during the market. Also, which led to the price of gold gradually rising to approach the level of $1960 per ounce. This is what the rise in the price of gold encouraged market players to gradually sell gold to achieve some profits. This flow of transactions has helped slow the baht’s decline.
For today, market participants will be watching the US labor market data report, such as the number of applicants for unemployment benefits (unemployment claims), in order to assess the future outlook for the Federal Reserve’s monetary policy. In addition, one of the most important points that participants will be waiting for is… Market to Watch: Sooner statement from Fed officials, especially Fed Chairman Jerome Powell (11:00 PM local time) after the latest overview of the US economy. The economy has not slowed much. At the same time, the war factor may also affect the inflation trend. Makes market players want to watch them What will be the Fed Chair’s stance on the Fed’s monetary policy outlook?
In addition, market players will continue to monitor the war situation between Israel and Hamas. Will the war intensify or expand to include the entire Middle East?
As for the direction of the baht’s value, we believe that the baht may face additional depreciation pressures. Amidst the state of risk in the financial market from the state of war between Israel and Hamas, which tends to intensify and escalate, this concern has led to the dollar becoming somewhat stronger, but the baht may receive some support. From the flow of gold profit selling transactions after the price of gold rose following the threat of war, the flow of funds for foreign investors remains very volatile. There may be another factor putting pressure on the fader. It can fluctuate and fall and if foreign investors continue to sell Thai assets, we estimate that strong selling of Thai assets from foreign investors may not be so intense. This is because the SET index has fallen to a level where evaluation is not expensive and is considered an important technical support area. As for Thai bond yields, they may not continue to rise much (market players are expected to wait for clarity on digital wallet measures).
However, one should be careful of volatility during the period when the market receives a gradual statement from the Fed Chairman. This is because market players have begun to give more weight to the Fed to continue raising interest rates at the December meeting or the meeting early next year and are of the opinion that the Fed may cut interest rates by only -50 basis points next year, which is whether the statement from… Federal Reserve Chairman This changes market players’ views on the direction of the federal funds rate. It may have a significant impact on the financial market.
We continue to see all assets still in a period of high volatility. From both uncertainty about the direction of monetary policy the war situation is vulnerable to worsening and escalation. 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 36.25-36.55 baht/$.
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