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Thai Baht at 5-Month High After Dollar Stumbles on Trump Remarks

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The US dollar continues to fall from long-term highs. Tuesday marked the fourth consecutive trading day of declines for the Dollar Index, which traded at a fourteen-month high of 97.0 last week. Approaching the end of Tuesday’s European session, the index had slumped into the 95.40s.

The dollar was affected for the worse on Monday and Tuesday by remarks from US President Trump, who expressed disappointment in the Federal Reserve’s policy of gradually raising US interest rates (now 2 percent). It is widely speculated that Trump would like a weaker dollar – an agenda that is done no favours by higher Fed rates.

The Thai baht has soared since late July, and continues to do so. The dollar bought only 32.67 baht on Tuesday, marking the baht’s strongest level in five months. Meanwhile, the baht approached multi-month highs against regional peers like the Malaysian ringgit and Singapore dollar. With recent data showing sustained growth momentum, the Bank of Thailand will be unable to avoid normalising monetary policy for much longer; the BoT’s governor, Veerathai Santiprabhob, admitted as much on Monday. In the current climate, both Thailand’s interest and inflation rates can be considered unusually low for an emerging market economy (both 1.5 percent).

The euro has seen strength in recent days. Against the dollar, it rallied on Tuesday into the 1.15s, further away from last week’s long-term low of 1.13. The euro is, however, set to remain under pressure over the coming nine to twelve months according to strategists at Radobank. The Radobank team is forecasting EUR/USD at 1.12 at the end of June next year.

The weaker Australian dollar will benefit Australia’s economy, per the minutes of the RBA’s most recent meeting, released on Tuesday. Like the euro, the Australian dollar has recovered in recent days and now buys 73.65 US cents.

In Turkey, an indirect – some might say sneaky – interest rate hike has allowed for a period of lira stability around the 6.0 per dollar level. Within the past week, Turkey’s banks have been prevented from borrowing from the central bank at its benchmark rate (the “repo” rate) of 17.75 percent and instead have been forced to borrow at the overnight lending rate, currently 19.25 percent. The decision effectively enacts a 150 basis-point hike.

It’s been a disappointing summer for bitcoin. The world’s most active cryptocurrency continues to tread water at levels in the mid-$6,000s.


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