Baht Slumps as Trump's Victory Strengthens US Dollar

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Picture courtesy: Kasikorn Research Center

 

The Thai baht reached a two-month low on Thursday, with projections it might dip below 34.5 to the US dollar shortly. This currency pressure follows predictions that the Federal Reserve will maintain higher interest rates longer than anticipated after Donald Trump clinched victory in the recent US election.

 

According to the Kasikorn Research Center (K-Research), the baht was quoted at 34.34-36 against the dollar, dropping from the prior day's rate of 34.17.

 

A declining yuan has further weighed down the baht. This trend is mirrored in other currencies like the yen, all suffering due to the dollar's surge post-election.

 

Kanjana Chockpisansin, a lead researcher at K-Research, indicates that the baht's depreciation is partly due to anticipated capital outflows from Thailand's bond market.

 

She notes, "The US bond yield rose as Trump's anticipated economic stimulus spending might necessitate bond issuance to finance this significant expenditure."

 

The US dollar's rally is attributed to investors scaling back expectations for the Federal Reserve's interest rate cuts. Previously, markets predicted a further 1% cut by the end of next year, following a 50-basis-point slash in September.

 

K-Research projects that the Fed might trim rates by 25bps in upcoming meetings, suggesting the baht could shift to a 34.70-80 range against the dollar, should rate projections hold true.

 

KGI Securities (Thailand) senior vice-president, Rakpong Chaisuparakul, mentions potential short-term baht depreciation as investors respond to Trump's win. However, he anticipates a market refocus on US economic fundamentals, including a decelerating economy and interest rate reductions.

 

The Fed fund futures forecast predicts the central bank will reduce rates to 4.50% by end-2024, with an additional 50bps cut by 2025, concluding at 4.00%.

 

Despite these forecasts, KGI maintains a perspective of a 100bps reduction by 2025, anticipating a soft landing or slowdown in the US economy next year, according to Mr Rakpong, reported Bangkok Post.

 

-- 2024-11-08

 

 

[KhunLA]

Almost 50 satang ... I can retire now 

 

[lordgrinz]

It's got a long ways to go before anyone will notice or care, it was 37-38 at the beginning of the year.