The Global Markets team at Krungsri Bank Public Company Limited has a perspective on the direction of the Thai baht this week, suggesting that the baht is likely to move within the range of 33.25-33.70 baht/USD. Compared to last week, the baht closed weaker at 33.43 per dollar after trading in the range of 33.38-33.84 baht/USD. Initially, the baht faced selling pressure due to stricter measures for welcoming tourists.

            Meanwhile, the Monetary Policy Committee (MPC) maintained the policy interest rate at 0.5% as expected. The dollar weakened against most major currencies, except for the yen, last week as investors eased concerns about the severity of the Omicron variant and returned to risk assets amid positive news regarding vaccine efficacy. Additionally, the U.S. approved the emergency use of COVID-19 oral medication.

            However, the core Personal Consumption Expenditures (PCE) price index for November in the U.S. rose by 4.7% year-on-year, marking the largest increase in 32 years, indicating a hot inflation environment. Foreign investors net purchased 4.535 billion baht in the Thai stock market and 16.834 billion baht in bonds, respectively.

 

Krungsri's Global Markets team believes that the main focus of the market remains on the direction of disease control measures in various countries and their economic impacts, as well as expectations for U.S. monetary policy, particularly regarding the reduction of the central bank's balance sheet or Quantitative Tightening in the near future. The thin trading liquidity in the market, amid the closing of investment positions before the year-end holidays, may cause exchange rates to fluctuate excessively if new news arises.

 

Regarding domestic factors, the MPC unanimously decided to maintain the policy interest rate, assessing that the Omicron outbreak poses significant risks to the economic outlook and emphasizing the importance of accelerating targeted liquidity distribution. The MPC continues to prioritize support for economic recovery, noting that Thailand's economic cycle differs from many countries, with demand-side inflationary pressures remaining low and cost pass-through being limited. This stance aligns with our view that the policy interest rate will remain at a historic low throughout 2022.

In this regard, the MPC expects Thailand's economy to grow by 0.9% this year and expand at rates of 3.4% and 4.7% in 2022 and 2023, respectively, supported by a recovery in domestic spending and the tourism sector. The MPC anticipates that the number of foreign tourists in 2022 will reach 5.6 million, while exports are expected to grow by 3.5% in 2022, compared to an anticipated high growth of 18% this year.