This morning, the baht strengthened, opening at 31.68 baht/dollar.
The baht opened this morning at 31.68 baht per dollar, strengthening from the previous day's close of 31.82 baht per dollar.
9 Sep '2568 Mr. Poon Panichphibun, money market strategist, Krungthai GLOBAL MARKETS, Krung Thai Bank revealed that The baht opened this morning at 31.68 baht per dollar, strengthening from the previous day's close of 31.82 baht per dollar.
Since last night, the baht (USDTHB) has been steadily appreciating, breaking through the support level of 31.85 baht per dollar (fluctuating within a range of 31.66-31.86 baht per dollar). This is supported by a gradual weakening of the dollar, which is accompanied by a decline in the US 10-year bond yield and the continued rise to record highs in gold prices. Market players continue to assess that the continued slowdown in the US labor market, following the latest jobs report that was significantly worse than expected, will support the Fed cutting interest rates approximately three times this year (approximately 3%).
Market players also believe the Fed may need to cut interest rates by 50 basis points at the September FOMC meeting. The dollar is also facing additional pressure from the gradual strengthening of the Euro (EUR) in response to the vote of confidence in Prime Minister François Bayrou, who lost the vote of confidence as expected by the market and will lead to the election of a new Prime Minister soon.
In addition to the gradual weakening of the dollar and the benefits of gold transaction flows, market players' adjustments to their holdings, such as stop-losses on short THB positions (seeing the baht weaken), also contributed to the baht's appreciation.
สำหรับ Trend of the baht value We acknowledge that the Thai Baht (USDTHB) has strengthened more than we initially estimated (lower weekly range of 31.85 THB/USD) as the dollar continues to weaken, along with the continued rise in gold prices, following rising expectations of a Fed rate cut.
In addition, adjustments to the holding positions of some market players, such as stop-loss positions on short THB positions (looking at the weakening baht), also contributed to the baht's appreciation.
We believe the baht still has room for gradual appreciation and could test the support level of 31.50 baht per dollar if US economic data, due to be released today starting at 17.00:3 PM Thailand time, reflect a slower US labor market than previously anticipated. This could lead market players to anticipate a greater likelihood of Fed rate cuts, which could be reflected in an upward revision of the Fed's likelihood of three rate cuts this year and the possibility of a 50-bps rate cut at the September FOMC meeting.
However, if the baht strengthens to test the 31.50 baht per dollar level or actually breaks above this level, in line with rising expectations for a Fed rate cut, we believe the baht could weaken somewhat as the market gradually absorbs the US Producer Price Index (PPI) and CPI inflation reports. This could lead market players to lower their expectations for a Fed rate cut, if both data points to a potential upward trend in US inflation due to the impact of the Trump 2.0 administration's trade policies.
Furthermore, French political issues remain uncertain. Throughout the week leading up to September 18th, there could be several protests. Fitch Ratings is also reviewing France's credit rating, which could put some pressure on French assets and the Euro (EUR). Similarly, the uncertainty surrounding Japan's political situation could make it increasingly difficult for the Japanese yen (JPY) to appreciate significantly in the short term.
In our BEER model, evaluating the baht's valuation, we find that a baht at 31.50 baht per dollar or higher would be a strengthening of -2 standard deviations (compared to a fair value of 34-35 baht per dollar). Historically, we have found that the baht is likely to gradually weaken from this significant strengthening level over the next one to two quarters.
Furthermore, we remain concerned that the volatility of the baht may rise again. We believe that market players should use options strategies or consider using local currencies to help increase efficiency in managing exchange rate risk.
Looking at the baht's range in the 24 hours, it is expected to be at 31.50-31.80 baht/dollar.
US stock market
The US stock market remains risk-on, driven by gains in major tech stocks, such as Broadcom (+3.2%) and Amazon (+1.5%), which benefit from market players' increasing expectations of a Fed rate cut.
However, market players are not rushing to take on too much risk, as the US stock market has recently rallied significantly, resulting in the S&P 500 closing up 0.21%.
european stock market
On the European stock market side, the STOXX600 index rose +0.52% after Prime Minister François Bayrou lost a confidence vote, as expected by the market, which will lead to the election of a new prime minister soon.
European stock markets also received some support from the rise of AI/semiconductor-themed tech stocks, such as ASML (+2.5%), on expectations of a higher Fed rate cut, which also boosted the rise of US tech stocks.
Bond Market
In the bond market, market players' expectations for a Fed rate cut remain high, particularly the Fed's 50bps rate cut at the September FOMC meeting. This continues to pressure the US 10-year bond yield, which has fallen to 4.04%.
This is because we differ from market players, who believe the Fed could cut rates three times this year (we revised our view to two rate cuts this year after the latest jobs report came in weaker than expected).
This leads us to believe that the US 10-year bond yield has declined somewhat in the short term, and there is a risk that it could rebound somewhat higher if market players lower their expectations for the Fed's interest rate outlook, which could happen if the CPI and PPI inflation reports continue to rise.
Meanwhile, concerns over fiscal stability in major economies remain. Therefore, we believe market players should wait for a rise in long-term US bond yields to gradually buy (they should not chase purchases, as the risk-reward may not be worthwhile at this point). Those with long-term bond investments can also let profits run.
currency market
On the currency market side, the dollar has been gradually weakening, in line with the decline in the US 10-year bond yield, following increased expectations of a Fed rate cut.
Furthermore, concerns over the French political situation have eased somewhat following Prime Minister François Bayrou's expected loss in the confidence vote, leading to the election of a new prime minister soon. This has also contributed to the strengthening of the euro (EUR), resulting in the overall dollar index (DXY) falling to the 97.4 point zone (fluctuating between 97.3 and 97.8 points).
In terms of gold prices, the decline in both the dollar and the 10-year US bond yield, following market players' gradual increase in expectations of a Fed rate cut, has driven the gold price (COMEX gold futures contracts for delivery in December 2025) to a continued rise, reaching a new record high.
However, gold prices are facing some pressure from profit-taking by some market players, resulting in the latest gold price fluctuating in the range of $3,670-$3,680 per ounce.
Over the next 24 hours, market players will be awaiting the release of the August NFIB Small Business Optimism Index, which will likely impact the Fed's monetary policy adjustments.
This includes the revision of employment data for the 12 months to March 2025 (BLS Preliminary Benchmark Revision to Establishment Survey Data), which may further reflect a slowdown in US employment. For example, non-farm payrolls for the 12 months to March 2025 may decrease from the previous report by an average of 3-5 positions per month.
In addition to the economic data reports, we believe that market players will be keeping an eye on political developments in Thailand, Japan and France.
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