The rapid depreciation of the baht has helped stocks in the export sector, say analysts, warning the currency is under pressure to slide further, resulting in continued outflows from the Thai stock market.
Investors are advised to monitor United States economic data that could influence investment and interest rate trends. For example, US inflation in January was higher than expected at 6.4%, prompting the market to predict the Federal Reserve will continue to ramp up rates, rising 0.25% at both its March and May meetings.
The forecast could lead to a fund exodus to buy dollars, making the greenback stronger in the short term, said analysts.
As a result, other currencies are likely to depreciate further against the dollar, including the baht, said market pundits.
Fund outflows would also cause the stock market to be volatile in the short term, according to analysts.
"We advise importers to buy foreign currencies to mitigate risks and exporters are recommended to sell foreign currencies above the level of 34.20 baht per dollar," said Krungthai Bank (KTB) market strategist Poon Panichpibool.
Investors should keep an eye on key US economic data to be released this week, including retail sales and the industrial production index, he said.
Investors believe the US central bank has a 52% chance of raising rates to 5.50% by its June meeting as inflation has yet to moderate as expected. Consequently, the US 10-year bond yield has risen to nearly 3.75%.
The stronger dollar and rising US bond yield have pressured the price of gold to plunge to less than $1,840 an ounce.
"Pressure on the baht is expected to persist amid the risks facing the financial market. That will encourage foreign investors to be net sellers of Thai assets, including both stocks and bonds," said Mr Poon.
Kasikorn Securities recommends baht depreciation as a theme for investment as the Thai currency already slipped below 34 baht to the dollar, the lowest in 1.5 months. Short-term resistance is estimated at 34.5 baht, which is positive for export stocks, the brokerage said.
