The Thai baht has risen to its strongest level against the greenback since January this year amid speculation that the benchmark interest rate will be cut next September after concerns about a recession in the US eased last week following the release of positive economic data.
The Thai baht is currently trading at around 34.43 baht per dollar, up significantly from its previous low of over 37 baht in April.
The dollar index, which measures the exchange rate of the US dollar against other major currencies, has also reached its 7-month low.
The US dollar weakened on Monday as investors expected a dovish outlook from the US Federal Reserve and awaited Chairman Jerome Powell’s speech in Jackson Hole.
Currently, traders are estimating a probability of about 28% for a 50 basis point rate cut next month, with a total of about 95 basis points of rate cuts expected by the end of the year. These numbers have come down slightly following the latest US CPI report. Despite these adjustments, the US dollar continues to weaken in anticipation of an impending rate cut.
Meanwhile, the MSCI index for emerging market currencies had just reached a new record of 1,759 points.
Daol Securities noted in its analysis that several companies listed on the Thai Stock Exchange are expected to benefit from the rising baht. These stocks include:
Airlines like AAV and BA, whose cost structure is based primarily on US dollars and a strong baht, would cut costs. For AAV, US dollar debt of about $1 billion would result in unrealized foreign exchange gains of about 1 billion baht for every strengthening of a baht against the dollar.
Due to their borrowing in US dollars, power plant groups result in the recognition of unrealized foreign exchange gains. However, these entries are purely accounting in nature and have no impact on cash flow. The affected power plant groups include GULF, BGRIM, GPSC, RATCH and GUNKUL.
Energy Group due to the positive net exposure in USD against THB, resulting in potential unrealized foreign exchange gains for PTTGC, TOP, IVL, while the impact on PTTEP and SPRC could be limited due to the use of USD as a functional currency.
And finally, IT distribution companies such as SYNEX and SIS, which import goods in US dollars. A stronger baht would have a positive impact on costs.
