As a result of better-than-expected financial information from the US and the US Federal Reserve’s decision to hold off on interest rate reductions, the ringgit is on track to experience major stress, possibly reaching 37 baht per money next year.
Opening at 36.76 ringgit against the greenback yesterday, the ringgit experienced a significant loss from its past week closing price of 36.38 baht.
The buck increased across the board, specifically against the Japanese yen, according to Poon Panichpibool, a worldwide market strategist at Krungthai Bank (KTB), reaching its highest levels since the middle of the 1990s after a higher-than-anticipated increase in US prices in March.
The ringgit and the greenback both experienced significant declines.
According to statistics from the US Department of Labor, the consumer price index rose by 3.5 % year- on- month in March, accelerating from a 3.2 % increase in February.
Key consumer cost inflation, an indication that excludes the dangerous food and gas prices, and serves as a parameter for assessing price stability, climbed 3.8 % year- on- year in March, maintaining the same growth pace as seen in February.
Financial markets anticipate the Fed postponing interest rate reductions until September in light of the most recent US data.
The Fed Fund rate reduction is anticipated once, if not for the entire year, as opposed to previous forecasts that predicted 3 to 4 rate reductions.
According to Mr. Poon, the dollar is anticipated to strengthen further and continue to depress the baht, which could soon test the dollar’s rate of 37 to the dollar.
Speaking after the Bank of Thailand’s Monetary Policy Committee’s ( MPC ) meeting on Wednesday, MPC Secretary Piti Disyatat said the baht showed the lowest rate among regional currencies against the dollar in the year- to- date.
According to the MPC’s statement, the baht’s volatility against the US dollar has risen, leading to greater depreciation compared to other regional currencies.
The Fed’s monetary policy and domestic economic and financial developments are responsible for this. The MPC has pledged to continue to monitor foreign exchange market fluctuations with care.
Roong Sanguanruang, head of global markets and research at Bank of Ayudhya ( Krungsri), said the baht may test the 37 level in the coming week, attributing it to dollar appreciation in line with US economic trends.
Additionally, the Fed is anticipated to postpone the first policy rate cut from the previous assessment in June. There could only be two rate cuts this year, she added.
The baht is anticipated to continue weakening following the Songkran water festival, which will primarily be impacted by the Fed Fund rate direction.