Thai baht leads Asian currency declines amid holiday trade

Emerging Asian currencies experienced declines in holiday-thinned trade today, with the Thai baht leading the fall as the US dollar remained firm and Chinese economic data highlighted an uneven recovery trajectory.

Markets were notably quiet across Asia due to closures in Singapore, Malaysia, Indonesia, the Philippines, and India.

The Thai baht declined by up to 0.5%, influenced by weaker gold prices, while the South Korean won and the Taiwan dollar saw marginal decreases.

A markets strategist from Krung Thai Bank, Poon Panichpibool, revealed the causes.

“For the Thai baht specifically, there could be some pressures from gold-related flows as gold prices have moved lower from Friday levels,”

Political turbulence in Thailand, Southeast Asia’s second-largest economy, is also expected to impact its assets, including a court case that could potentially lead to the prime minister’s dismissal.

The rise in political uncertainties has already weighed on investor sentiment, with Thailand’s currency and equity markets among the region’s worst performers in the year-to-date, analysts from ANZ noted in a client communication.

Poon added that the baht might face additional pressure from foreign fund outflows, as political instability deters foreign investors from purchasing Thai assets, despite the seemingly attractive valuations of its stocks and bonds.

Meanwhile, the Chinese yuan remained stable, though shares dropped by about 0.6%, as investors processed weaker-than-expected data indicating ongoing difficulties in the property sector. The People’s Bank of China left a key policy rate unchanged, as anticipated.

Globally, investors are looking forward to the US retail sales numbers for May, which are set to be released tomorrow. This data is expected to provide further insights into the timing of potential interest rate cuts by the Federal Reserve this year.

The Federal Reserve recently published updated projections, revealing that the median forecast from all 19 US central bankers anticipates a single rate cut within this year, reported Bangkok Post.