The baht opened this morning at 34.36 baht per dollar. “Appreciated”

The baht opened this morning at 34.36 baht per dollar, “appreciating” from the previous day’s closing level of 34.46 baht per dollar, said Mr. Boon Panitchpiboon, Financial Market Strategist, Krungthai GLOBAL MARKETS, Krung Thai Bank.

Since last night, the baht has been fluctuating. In the first period, the baht gradually weakened, testing the resistance area of ​​34.50 baht per dollar. Follow the flow of transactions to buy gold at the moment of short squeeze. After the price of gold (XAUUSD) gradually decreased by about -20 dollars per ounce. Until the short-term support area of ​​about 2485 dollars per ounce was tested. Before the price of gold continued to rebound upwards, it approached the resistance area of ​​around 2500 dollars per ounce again after the dollar gradually weakened. Combined with the timing of the slight contraction of the US 10-year bond yield amid market players' hopes that the Federal Reserve will be able to gradually cut interest rates by -100 basis points this year. In addition, the dollar is also under pressure due to the risk conditions in the US financial market. This has led to a rebound in the price of gold along with the weakness of the dollar, which has encouraged the baht to gradually strengthen towards the support area of ​​34.30-34.40 baht per dollar. If the baht strengthens and breaks out of this zone, it may gradually strengthen and test the highest point of strength this year at 34.10 baht per dollar.

The US stock market remains in a risk-on mode amid market players’ hopes that the Fed Chairman is likely to signal a willingness to gradually cut interest rates at the Fed’s annual symposium in Jackson Hole, while market participants ease concerns about the US economic outlook. The sharp slowdown in addition, the US stock market remains supported by a rise in specialized stocks. Artificial intelligence/semiconductors such as Nvidia +4.4%, which led the Nasdaq Composite Technology Index to rise +1.39%, while the S&P 500 closed the market +0.97%.

On the European stock market side, the STOXX600 index continued to rise +0.61% due to exposure to risks from the US financial market. In addition, the European stock market also received support from the increase in mining stocks such as Rio Tinto +1.7% after the prices of metal ores gradually rose. This comes after the weakness of the dollar during this period.

As for the bond market, the US 10-year yield continues to fluctuate sideways in the 3.80%-3.90% range as market players wait for more new factors, including important US economic data reports, comments from Fed officials, and especially the statement by Fed Chairman Jerome Powell at the annual Jackson Hole Fed Symposium. Moreover, one should be wary of the US 10-year yield rising if the market returns to believing that the Fed may cut interest rates this year by less than the -100 basis points that market players are currently expecting. However, we maintain our original recommendation to “focus on a buy-the-dip strategy” or buy long-term bonds at a time when bond yields are adjusted higher. As for the timing of the bond yield decline, it is a test of the short-term support area. It may provide an opportunity for market players to consider selling to take some profits if they have a range-bound trading strategy.

In the currency market, the dollar is still facing weak pressures. Amid the exposure of the US financial markets to risks, however, including the views of market players who expect the Fed to cut interest rates around -100 basis points this year, the dollar still enjoys some support. In line with the weakness of the Japanese yen, the overall dollar index (DXY) gradually declined to the 101.9 point level (fluctuating in the range of 101.8-102.3 points). Although initially, the price of gold (Comex gold contract for December delivery) will face continued pressure from profit-taking pressures. Including the rise in the dollar and the US 10-year bond yield until it fell to test the support area of ​​$2,520-2,530 per ounce. However, gold prices managed to rebound to approach the resistance area of ​​$2,540-2,550 per ounce. Following the decline in the dollar and the US 10-year bond yield, the flow of gold transactions follows the movement of gold prices. It also contributed to the volatility of the baht price last night.

Today, market participants will await the assessment of the European Central Bank (ECB) monetary policy direction through the July inflation report.

In addition to the economic data reports mentioned above, market participants will be watching the comments of Fed officials such as Raphael Bostic (Fed Bank of Atlanta) and Michael Barr (Vice Chairman for Supervision) in the early hours of Wednesday, August 21, to assess their views on the US economic outlook and the direction of the US economy. Fed Monetary Policy

As for the direction of the baht, we believe that although the baht will gradually rise more than we expected, we are starting to see signs that the above-mentioned baht appreciation may slow down somewhat during this period. Until the market becomes aware of additional new factors, especially the issue of the direction of the Federal Reserve interest rate. This will depend on important US economic data reports. And the statements of the Federal Reserve Chairman, including Fed officials this week. In addition, we see that the factors that supported the baht appreciation in the previous period, such as the rise in the price of gold. Began to face the resistance area Do it in the short term The price of gold is at risk of contraction. Can the short-term support area be tested? Until new factors emerge This came to support the price of gold to move in a clearer direction, for example, the price of gold rose through the resistance area and reached a new all-time high, however, we cannot deny that during the day The baht may also receive support from strong purchases of Thai assets by foreign investors. After the uncertainty of the Thai political situation gradually subsided. Therefore, we initially assessed that the baht may fluctuate sideways near the 34.30-34.40 baht/USD area. The baht may not be able to fall beyond the 34.50 baht/USD resistance area easily if there are no clear factors pressuring the baht, such as the market believing that the Fed will cut interest rates by around -75 basis points or less this year (which will affect both the dollar and US bond yields and gold prices) or the Thai financial market is under pressure due to political uncertainty. As for the support area for the baht, you should watch closely whether the baht will strengthen and break out of the 34.30 baht/USD area, because if the baht really strengthens and breaks through that area, this will give the baht a chance to continue strengthening. It is not difficult to test the strongest point this year, around 34.10 baht/USD.

By the way, during the day, we see that the baht has the opportunity to fluctuate on both the strong and the weak sides. It is following the Japanese yen (JPY) which during this period moved in a fairly wide range of 145-148 yen per dollar. It can be seen from the previous day that the yen strengthened from the 148 yen per dollar area. It even approached the 145 yen per dollar level, which put pressure on the dollar to fall. This helped the baht to gradually strengthen until it tested the 34.40 baht per dollar area.

We maintain the same view that the baht still has the chance to move and fluctuate accordingly. Changes in factors that influence the direction of the baht, such as market players’ views on the direction of the Fed rate or adjustments in the JPY/JPY short position, make market players use strategies to close risks more diversified either using instruments such as options or local currency. This will increase the efficiency in closing exchange rate risks.

I am looking at baht today and it is expected to be at 34.30-34.45 baht/USD.