The baht is expected to continue its rise against the dollar following a recent surge to a 19-month high of 32.2 baht to the dollar. This increase can be attributed to the anticipation of potential interest rate cuts by the US Federal Reserve. If the Fed decides to cut rates by more than the expected 25 basis points at its upcoming meeting, the baht could appreciate even further.
According to Kasikorn Research Center (K-Research), the Thai currency saw a boost as investors scrambled to sell the dollar in anticipation of the Fed’s Federal Open Market Committee meeting. The yen also experienced a surge, reaching 139.73 per dollar, its strongest level in over a year. Treasury yields dropped for the second consecutive week, with two-year notes closing at a two-year low as market expectations leaned towards a 50-basis-point rate cut by the Fed.
Market indicators suggest a 59% probability of a 50-basis-point rate cut by the Fed, compared to 30% the previous week. This potential rate cut would be the first by the Fed since 2020. Kanjana Chockpisansin, head of research at K-Research, noted that the market has long been anticipating a significant rate cut by the US central bank, and if this expectation is met, the baht could see further appreciation. K-Research predicts the baht to trade within the range of 33.0-33.8 to the dollar in the coming week.
In addition to the US, central banks in Japan and the UK are also scheduled to meet this week. While the European Central Bank recently lowered its deposit rates for the second time this year, analysts expect the Bank of Japan to maintain its current interest rates at this meeting. The possibility of a larger interest rate reduction by the Fed has also driven gold prices to record highs, with spot gold trading at an all-time high of $2,589.23 before settling at $2,588.29. US gold futures rose by 0.2% to $2,615.80 as the dollar weakened by 0.2%.
Tim Waterer, chief market analyst at KCM Trade, noted that the potential for a 50-basis-point rate cut by the Fed has caused gold and the dollar to move in opposite directions. He predicts that if the dollar continues to weaken, gold prices could reach $2,700 by the end of the year. Overall, the conditions for gold remain favorable, with further gains expected in the near future.
As global markets await the decisions of central banks in the US, Japan, and the UK, the baht is poised to benefit from potential interest rate cuts by the Fed. The currency’s recent appreciation against the dollar reflects investor sentiment and market expectations surrounding these upcoming monetary policy announcements. The baht’s forecasted rise could continue if the Fed delivers a more substantial rate cut than initially anticipated, further strengthening the currency’s position in the foreign exchange market.