Bangkok: Thai stocks are consolidating as investors await the outcome of crucial Thai-US trade negotiations. Meanwhile, the baht has experienced a significant weakening, with expectations of further gradual depreciation if Thailand is subjected to import tariffs as high as 36%. The baht risks a further 1.2% depreciation.
According to Thai News Agency, the Thai stock index opened this morning at 1,243.27 points, reflecting a slight dip of 0.87 points. As of 11:32 a.m., the index stood at 1,242.02 points, down by 2.12 points or 0.17%, with a trading volume of 25.71 billion baht. Mr. Suwat Wattanapornprom, Director of Research and Investment Services at Krungsri Securities, highlighted the significance of the US tariff rate announcement, which will determine Thailand's competitiveness against ASEAN and emerging market competitors. A 25% tariff rate is projected to allow Thailand to maintain its competitive edge.
In related developments, the US Federal Reserve (Fed) decided to keep the short-term interest rate steady at 4.25-4.50%. The vote, which concluded with a 9 to 2 outcome, was influenced by prevailing economic concerns despite a strong second-quarter GDP figure. The market is now keenly anticipating Friday's labor market figures to gauge the Fed's future actions.
As for the baht, it opened this morning at 32.73 baht per dollar, marking a notable decline from the previous day's closing rate of 32.49 baht per dollar. Mr. Poon Panichpibul, a market strategist at Krungthai GLOBAL MARKETS, Krungthai Bank, explained that the baht's depreciation is driven by the strengthening dollar, rising US 10-year bond yields, and falling gold prices. Despite the Fed's decision to maintain the interest rate, Fed Chairman Jerome Powell underscored a cautious approach towards any rate cuts, emphasizing a thorough evaluation of US trade policy impacts.
The baht's continued weakening is anticipated, particularly after it breached the 32.50 baht/dollar resistance level. However, should the US employment data released on Friday not meet expectations, it could exert downward pressure on both the dollar and US 10-year bond yields, fostering a potential downward trend. The Thai baht remains susceptible to fluctuations, especially if Thai exports encounter tariffs up to 36%, which could trigger an additional 1.2% depreciation. The baht's trading range over the next 24 hours is projected to be between 32.60 and 32.85 baht/dollar.