The Thai baht hit a near nine-month low on Tuesday, extending losses for a seventh straight session, as the US Federal Reserve's recent hawkish turn continued to weigh on the currency.
Equity markets across Asia tracked a global overnight rebound on Wall Street, as market participants turned their attention to economic growth.
The baht, which has come under pressure along with its regional peers after the Fed last week indicated earlier than expected policy tightening, dipped to its lowest since Sept. 30, 2020.
"The baht's recent weakening is largely due to the US Fed's recent hawkish pivot, likely exacerbated by Thailand's already weak economic fundamentals due to the virus situation," said Dhiraj Nim, FX strategist at ANZ Research.
While strict entry requirements and quarantine measures initially helped keep Thailand's coronavirus outbreaks under control, the curbs saw revenue from its key tourism sector plummet.
Investors are also awaiting a Bank of Thailand meeting on Wednesday, where the central bank is expected to keep its policy rate at a record low, but likely cut its economic growth outlook.
The baht is likely to move between 31.55 and 31.70 during the day, Krungthai Bank market strategist Poon Panichpibool said.
Poon explained that the baht had weakened due to concerns among foreign investors about the Covid-19 situation in Thailand. This worry had prompted them to sell their risk assets in the country. He added that this issue was of greater concern to Thailand than the strengthening of the dollar.
However, the baht would not weaken sharply, as exporters aim to sell dollars when the baht reaches around 31.60 to 31.70 to the US currency.
He said it was almost impossible for the baht to hit 32 to the US dollar.
In which case we can expect it to be knocking at 35 by the year end……
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