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The baht weakened to 34 baht against the US dollar on Tuesday, its lowest point against the greenback in five years, due to growing concerns on global economic situations, with analysts warning of further losses.
The Thai currency opened at 34.07 baht per US dollar on Tuesday, a level not seen since 2017, weakening from Monday’s close of 34.04.
Poon Panichpibool, a market strategist at Krungthai Bank, said the currency market is avoiding mounting risks arising from the Federal Reserve’s interest rate hikes and the Covid-19 outbreak situation in China.
As the baht has breached its key resistance level of 34 baht per US dollar, Poon warned that the next resistance level of 34.15-34.20 baht must be closely monitored, as it would provoke panic attacks among importers and open the door to further baht’s sell-offs.
“Businesses should use hedging tools such as options to manage risks in the highly volatile currency market,” Poon advised.
Quek Ser Leang at UOB Group’s Global Economics and Markets Research predicted that “if USD/THB can maintain a foothold above 34.00 within these few days, it is likely to strengthen further.”
“Resistance levels are at 34.25 and 34.40,” Leang added. “The risk for USD/THB is on the upside as long as it does not move below 33.70.”
According to Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Securities, one factor for the baht’s weakening is that the Bank of Thailand insisted on holding its policy interest rate steady at 0.5 per cent to support domestic economic recovery, despite the US move to hike its rate to tackle inflation.
“The risk of currency depreciation arises if any country refuses to raise its interest rate in order to maintain domestic economic stimulus measures.” Pipat said.
“Under the current economic situation, the Bank of Thailand is unlikely to raise the interest rate as the economy has not recovered yet.”