The Baht continue to appreciate, reaching its highest level in 6 months

On 5 August 2024, there was a summary of the Baht movement which reach the most appreciation point in six months at 34.35 Baht per US Dollar. The Baht continue to appreciate after the overall U.S. economic indicators weakeer than expected. There are signs that the USA may cut its policy interest rate in September in line with the Federal Reserve Bank’s policy (Fed).

Let’s get to know currency appreciation/ depreciation first

The appreciation can be simply said that the value of a currency increases compared to other currencies or gold. In other words, when compared to the past, we can use that currency to trade more goods and services from overseas. To understand better, let’s say that our currency has more purchasing power.

Depreciation is the value of a currency that is less compared to other currencies or gold. In other words, compared to the past, we can use that currency to trade less goods and services from overseas. To understand better, let’s say that our currency has less purchasing power.

Last week, the Baht's appreciation may be partly attributed to three key factors:

The appreciation of overall Asian currencies that is evident is the Yen. This is due to the central bank raising the policy rate to 0.25% from 0.00-0.10%, along with the plan to gradually reduce the purchase amount of Japanese government bonds in the future.
The rise in gold prices in the Global market was further bolstered by geopolitical risks.
Net buying status of Thai bonds by foreign investors

This is because non-agricultural employment figures and the US unemployment rate reported last week showed weaker-than-normal signs as expected.

In September, we may see a policy meeting to cut interest rates by more than 25 bps or 0.25%, which may weaken the baht itself. Based on the probability, the baht will be around 35.10 – 35.60 Baht per Dollar. Significant factors to be monitored include the direction of foreign investment and other factors that may arise next week, particularly the Constitutional Court’s ruling on the dissolution of the Move Forward Party.

In addition, there are also data on imports and exports in June of the US economy, the ISM index, the PMI index, which includes China, Japan, the Eurozone, the US and the UK.