สัปดาห์ที่ต้องจับตา ‘สงคราม-กนง.-Fed’ ชี้ชะตาเงินบาท | THE STANDARD WEALTH

This discussion, featuring Mr. Wachirawat from SCBFM, Siam Commercial Bank, addresses the impact of global events, particularly the ongoing war, on financial markets, with a specific focus on the Thai baht, oil prices, and central bank policies. The war has significantly influenced global financial markets, especially concerning asset performance and the price of oil. The Thai baht and bond exchange rates have been clearly affected. Notably, the correlation between the Thai baht and crude oil prices has dramatically increased. While historically, the Thai baht had a stronger correlation with gold (around 50% over the past two years), the war has shifted this dynamic. Since the war began in March, the correlation between crude oil and the Thai baht has jumped from 25% to 78%, surpassing that of gold. This indicates that global factors, especially oil prices, are now dominating the market and heavily influencing the Thai baht. The US dollar index also shows a higher correlation with oil prices. The rise in oil prices due to the war has created concerns about inflation, which in turn has pushed the US dollar higher, strengthening its exchange rate. This is reflected in the increased citation rates, reaching 60-70%, and has led to a significant shift in global investment trends. Previously, there was a tendency to sell dollars, but with the outbreak of war, the dollar has become a bullish asset, with positions turning positive. This strengthening of the dollar has resulted in the depreciation of most regional currencies and has distorted the performance of global assets. Looking ahead, the Thai baht is expected to fluctuate within a range of 31.90 to 33 baht per US dollar for the next 1-2 months. While the market is starting to get accustomed to the ongoing conflict, with stock market indices in America hitting new highs and Asian stocks rebounding, the risk of an escalation into a regional war remains. However, the price of crude oil is not expected to break through $110, even with the continued closure of the strait. This is because various countries, including OECD members, America, and Europe, have implemented measures to stabilize prices, such as releasing special oil reserves. Saudi Arabia has also adjusted its oil delivery methods, increasing supply during the crisis. This has helped to partially offset the supply disruption, keeping oil prices around $110. Consequently, regional currencies, including the Thai baht, are less likely to break through the 33 baht per dollar mark. However, a significant appreciation of the Thai baht, potentially below 32 or even 31.85, would require the shipping channels to return to normal and the oil supply to recover. This would necessitate crude oil prices dropping to around $60 or $70, which is deemed difficult. Even if the war ended and the strait reopened, the oil supply is estimated to recover only about 70-80% within the next 2-3 months, not reaching 100% of pre-war levels. This makes a substantial drop in oil prices unlikely, thus limiting the baht's potential for significant appreciation. Beyond the war, capital flows are another crucial factor. If the war were to end quickly, the flow of funds that previously left emerging markets could return, leading to an appreciation of currencies like the Thai baht. The domestic market, particularly Thailand's fiscal situation, is also a concern. Despite positive news from Moody's upgrading Thailand's outlook from Negative to Stable, the Thai baht has not appreciated. This is attributed to the dominance of global factors and the market's existing concerns about Thailand's public finances. There are worries about the government's plans to borrow money, which has led to a rise in bond yields, reflecting market anxiety about public finance. This could hinder the Thai baht's ability to strengthen. Regarding central bank meetings this week, both Thailand's Monetary Policy Committee (MPC) and the US Federal Reserve (Fed) are expected to keep interest rates unchanged. For Thailand, this decision is primarily driven by weak domestic demand and a negative inflation rate (-0.08%), indicating that inflationary pressure is not yet severe and financial conditions remain tight. The current situation is different from 2022, when the Russo-Ukrainian war led to sharp interest rate hikes by central banks due to rapidly rising energy prices and higher inflation. In 2022, the Fed raised rates by 4.25% within a year, and Thailand's MPC raised rates eight times over two years. However, the current financial situation is tighter than in 2022, and inflation rates are lower. In 2022, both the US and Thailand saw inflation around 5%, whereas now Thailand's inflation is negative, and the Fed's is around 2-3%. The Fed's interest rate is currently 3.75%, and Thailand's is 1%, compared to 0.25% and 0.5% respectively in 2022. Given lower inflation and tighter financial conditions, sharp interest rate hikes are not considered necessary. Central banks, including the Fed and the MPC, recognize that the energy crisis is a supply-side problem that cannot be solved by monetary policy. Therefore, raising interest rates would not be effective. This stance of maintaining unchanged interest rates from both the Fed and Thailand's MPC could ease market anxiety, as seen in the recent easing of inflation concerns and bond yield increases. If central banks continue to send clear signals about their policy direction, it could help mitigate the situation, potentially leading to a gradual return of capital flow to emerging markets. The US stock market hitting an all-time high suggests a positive market reaction to these central bank signals. In conclusion, the war and energy prices are significantly influencing the Thai baht's exchange rate, leading to its current trading range. The strengthening dollar, driven by inflation concerns, is a key factor. While the market is adapting to the war, central banks are likely to maintain current interest rates, viewing the energy crisis as a supply-side issue. These central bank signals could support market stability and encourage a return of investment to emerging markets.