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Speculation Bumps Up Baht

12 Nov, 2022

The baht surged to its strongest level in almost three months on Friday after China eased some of its quarantine rules for travellers and speculation the United States Federal Reserve would be less aggressive with its rate hikes.

The baht strengthened to 35.70 per US dollar on Friday, its highest level since Aug 22, according to Kasikorn Research Center (KRC).

As of 1.15pm in Thailand, the baht stood at 35.83 against the greenback, up 2.9% from 36.88 baht when the market closed on Thursday.

The centre's research executive Kanchana Chokpaisarnsilp said the stronger baht was in line with China's yuan, supported by news that Beijing eased some of its Covid-19 curbs.

A man walks past an electronic board displaying forex prices at a currency exchange. (Photo: Pornprom Satrabhaya)

According to AFP, Beijing announced the relaxation of some of its hardline Covid-19 restrictions yesterday after the authorities had earlier vowed to stick with its zero-Covid policy despite mounting economic damage.

Ms Kanchana said the US dollar also faced a sell-off following a report of cooler than expected US inflation data on Thursday and the possibility the Fed might be less hawkish in raising the policy rate in its next rounds.

According to Bloomberg, most emerging market Asian currencies soared yesterday as growing bets for a slower path of Fed rate hikes hammered the dollar.

South Korea's won jumped 3%, the baht advanced by at least 2% and the Taiwanese dollar strengthened by the most since March 2021.

The Philippine peso gained the most in a span of more than two decades.

Softer than expected US inflation data increased speculation the Fed will be less aggressive in raising interest rates, raising the prospect that the dollar has reached a peak.

A slower pace of US hikes may offer some respite for emerging market assets, which have tumbled this year amid an exodus of cash from risk assets.

"A softer dollar should create a conducive environment for stretched Asian currencies to rebound," said Christopher Wong, foreign exchange strategist at Oversea-Chinese Banking Corp in Singapore.

"Some of those that could benefit more on a relative basis include the baht and the won."




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