KResearch reported that the Thai baht last week weakened heavily amidst purchases of US dollars while investors were shifting to safer assets; however, the baht’s weakening was considered in line with other currencies in Asia.

The Thai currency on 6 May closed at 30.22 baht against greenback, compared to 29.84 baht per US dollar on 29 April.

Major internal factors affecting the baht movement this week include the domestic political situation and measures of the central bank to maintain the currency’s stability.

Other external factors comprise investment direction in risky assets of monetary markets worldwide, economic reports of China for April and other important economic figures in the US.

Stocks have experienced a huge sell-off as foreigners are pressurized by the weakening Thai currency. In the beginning of the year, the Thai currency strengthened by 3%, but has now declined to 2%.

However the BoT Director of Exchange Control & Credits Department Wongwatoo Potirat said that even though the Thai currency has weakened, it has not dipped down as low compared to the Malaysian currency.

Meanwhile, 70% of the capital inflows worth a total of 50 billion THB from overseas have flooded the Thai markets amid the political crisis and has now been sold, to buy US dollars, leading to capital outflows. The investores have shifted their investments to bond and non-voting depository receipt (NVDR), Ms Wongwatoo said.

The baht reached the highest level for the first time in 19 months, according to the research center. The appreciation was speculated to be caused by the Bank of Thailand’s (BoT) efforts to prevent the currency from fluctuating further.

The Thai currency has appreciated throughout the week, from 11-15 January 2010, in line with other Asian currencies. The appreciation was in part due to the US’ economic figures which are lower than expected. The baht also got support from the selling of the US dollars and foreign investors’ buying of Thai stocks.

On Friday, the baht strengthened, closing at 32.87 THB/USD when compared to 33.15 THB/USD on last Friday, 8 January 2010. The KRC forecast that next week, from 18-22 January 2010, there will be no factor which can significantly affect the liquidity of the financial market, making it more likely that the short term interest rate will be stable at 1.25%.

The baht is expected to move in a narrow frame of 32.70-33 THB/USD. Factors to be monitored include Thai export reports in December 2009 by the Commerce Ministry, the direction of the THB currency, regional stock markets, and signs for currency measures issued by the BoT.

The Thai Baht traded in line with other currencies in regional markets, while the world currency such as the US dollar remained stable today. Investors still wait and see the announcement on performance of major financial institutions in the United States of America.

As for other major currencies, the Japanese Yen closed at 93.20 against the greenback, weaker than this morning’s close of 92.91-92.94 against the dollar. The Euro closed at 1.3971-1.3980 against the greenback, remaining stable from this morning’s close of 1.3977-1.3980 against the greenback.

The Thai Baht is expected to trade at 34.10-34.15 against the greenback.