The baht fell to a 10-month low on Wednesday, while stocks and bonds also slid under foreign selling pressure, with investors worried that high oil prices and government spending plans would widen the country’s current account deficit.
Most other Asian emerging market currencies traded in narrow ranges ahead of the US Federal Reserve’s monetary policy decision due later in the day and regional central bank meetings this week.
The baht slid 0.6%, its second day of decline and marking its lowest level since Nov 10. As of Wednesday afternoon, the baht was trading at 36.26 per US dollar.
Oil prices retreated from 10-month highs on Wednesday but have risen 10% this month.
The Stock Exchange of Thailand slumped 0.9% to its lowest level since Aug 16 and was hovering close to 1,500 points, nearly 10% lower than at the start of the year.
Long-duration bond yields in Thailand have risen around 60 basis points so far this month to touch a 16-month high of 3.26%, according to LSEG (London Stock Exchange Group) data.
The new government plans to sell government bonds worth up to 272 billion baht in the October-December period, according to market sources, as part of a 2.4-trillion-baht borrowing plan in fiscal 2024.
Poon Panichpibool, markets strategist at Krungthai Bank, said soaring oil prices had prompted some commodity-related players to purchase dollars, and if oil prices were to march higher, that could fuel concern about the country’s current account.
“The situation near-term looks unfavourable for the baht both domestically and externally amid both fiscal concerns and the US economy holding well, supporting greenback strength,” Maybank analysts also wrote in a note.
Apichart Phubancherdkul, head of strategy research at Tisco Securities, said investors are worried about the fiscal position as the government has announced various policies, which have both good and bad sides.
“If there are a lot of stimulus policies or cutting various costs, it will affect the budget and make borrowing costs higher,” he said. “There is a concern about the fiscal position.”
Moh Siong Sim, forex strategist at Bank of Singapore, also said the market is worried that oil and fiscal stimulus would worsen the current account deficit. “Thai bonds have sold off on worries of greater bond issuance to fund the fiscal stimulus. This is taking a toll on the baht,” he said.
Elsewhere, the Indian rupee hovered near a record low and was expected to remain under pressure. Indonesia’s rupiah and the Philippine peso both eased 0.1% ahead of interest rate decisions by Bank Indonesia and the Bangko Sentral ng Pilipinas on Thursday. The two central banks are expected to keep their key interest rates steady for the rest of the year, according to Reuters polls.
Markets expect the Fed will almost certainly keep rates on hold at 5.25% to 5.50%, putting the focus on its stance about on further policy decisions. Futures markets are pricing in a 30% likelihood of a quarter-point increase in November or 40% chance it will be in December, according to the CME FedWatch tool.
The Fed decision will be announced around 2am Thursday Thailand time.
China, meanwhile, kept benchmark lending rates unchanged at a monthly fixing, in line with expectations, as fresh signs of economic stabilisation and a weakening yuan reduced the need for immediate monetary easing. The yuan, which has fallen 5.5% so far this year, traded flat.
Most stock markets across Asia slid. Shares in Kuala Lumpur and Shanghai retreated 0.2% and 0.3% respectively. Indonesia’s benchmark index was the sole outlier, rising 0.7% and marking its highest level since December 2022.