Thailand: Thai baht soars 1% on rate hike drum roll

  • The Thai baht appreciated more than 1% on 1 Aug 22, logging a strong start to Aug 22 which is expected to see the country finally join its regional and global peers in normalising its pandemic-era stimulus policy as the economy gains traction.
  • Japan’s yen was trading at an over six-week high, firming more than half a%age point as the US dollar drifted near its three-week low, while other Asian currencies traded slightly lower against the greenback.
  • The Thai baht, opening after an extended weekend, jumped as much as 1.3% to THB36.16 per dollar – its best intraday move since 5 May 22 – after the Bank of Thailandon said on 29 Jul 22 that it was highly likely to raise its key policy rate a week later, its first hike since late 2018.
  • “Although several Asian central banks have surprised markets on the hawkish side in 2022, Thailand’s policymakers are likely to take a more cautious approach,” analysts at Goldman Sachs said in a note. They expect the Bank of Thailand (BoT) to hike its rate by 25 basis points (bps) as the central bank is seen moving gradually towards tightening considering nascent recovery amid persistent inflation headwinds.
  • Thailand, Southeast Asia’s second-largest economy and a net-oil importing nation, is expected to grow 3.3% in 2022, according to the BoT’s outlook, compared with only 1.5% in 2021.
  • The inflation rate is seen peaking in 3Q22, averaging significantly above its target range of 1% to 3%.
  • Barclays analysts expect Jul 22 inflation – set to be released later this week – to be nearly steady on a sequential basis driven by a drop in oil prices.
  • Among equities, shares in Singapore and Thailand advanced about 0.9% and 0.6%, respectively, while equities in the Philippines were down 1.1%.

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