HomeNewsUSD/THB Lower as Thai Baht Steadies Ahead of BOT
USD/THB Lower as Thai Baht Steadies Ahead of BOT

USD/THB Lower as Thai Baht Steadies Ahead of BOT

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USD/THB continues to retreat from last month’s 17-year high as traders buy the baht ahead of Wednesday’s interest rate decision from the Bank of Thailand.

At the time of writing, the US dollar to Thai baht exchange rate is 35.76, down 0.04 (-0.13%).

The baht has strengthened considerably in recent weeks. At Friday’s lowest point, the Thai currency had climbed almost 4% against the greenback since July. However, the dollar recovered later in the session following the United States labor market data.

The US Non-Farm Payrolls (NFP) statistics exceeded analyst expectations by a wide margin. It was anticipated that the data would indicate that the US economy created 250,000 new jobs in July. However, even the most optimistic estimate was lower than the actual number of 528,000, which has lowered the US unemployment rate from 3.6% to 3.5%.

The better-than-expected report caused the US dollar to strengthen as traders wagered that the Federal Open Market Committee (FOMC) will maintain its hawkish stance.

Following the 75 basis point increase last month, Federal Reserve Chair Powell stated that future interest rate increases will depend on economic data. A healthy labor market should therefore allow the fed more leeway to tighten monetary policy.

Despite the recent pullback, the US dollar has gained almost 8% against the Thai baht this year. The baht’s weakness is because the BOT has been slow off-the-mark tightening policy to fight inflation. Instead, the central bank has opted to keep the currency weak to stimulate tourism and exports. However, the bank is now expected to raise rates by 75 basis points at the August 10 meeting.

US Dollar to Thai Baht Outlook

The daily price chart shows USD/THB has risen steadily this year. However, the baht’s recent strength has pushed the pair lower towards a key support level.

Notably, Friday’s sell-off stalled at the 50-Day Moving Average (DMA) at 35.65 (green line). Technical traders will be paying close attention to see if the indicator continues to support the price in coming sessions.

If the market breaks below the 50-DMA, its likely to extend lower towards the 100-DMA at 34.83 (blue line). By contrast, if USD/THB maintains a level above the 50-DMA it could turn higher, targeting last month’s multi-year highs.

Ahead of the crucial policy meeting, it’s difficult to predict which scenario will play out. However, it’s logical to expect the baht to strengthen if the Bank of Thailand delivers a 75bp hike and weaken if the BOT fails to deliver.

USD/THB Exchange Rate Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.