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Thai baht and Malaysian ringgit mini revival likely short-lived

By Andreas Ismar

08:09, 26 August 2021

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Baht banknotes
Thai baht banknotes - Photo: Shutterstock

The Thai baht and the Malaysian ringgit have enjoyed mini revival this week as investors risk appetite returns ahead of the US Federal Reserve's (Fed) speech at Jackson Hole.

The baht, which has been the weakest Asian currency year to date, rose markedly, surging 1.8% this week. While the ringgit has gained 1.2% against the greenback so far this week

The baht's rise has come on the back of plans to reopen the economy despite elevated number of COVID cases in Thailand and Malaysia.

Jackson Hole

Analysts at ING attributed to increases to returning risk appetite as recent weaknesses provided entry opportunity for investors. So far this week,  Malaysia’s main stock index rose 4.1% while that of Thailand up 3.5%.

The Jackson Hole economic symposium, starts tomorrow and is expected to give clues on the timing of Fed’s tapering, could sour investors’ risk appetite and reverse the mini uptrend.

ING analysts viewed that gradual fall in the number of COVID cases in emerging Asia prompted investors “to find value in the Asian equity dip…The question is whether investors want to add to risk positions ahead of Friday's Jackson Hole event.”

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Thai fundementals still weak

“We think investors will want to wait to hear on this subject from Jerome Powell on Friday before pushing ahead with another major round of risk-buying, dollar-selling.”

Philip Wee, currency strategist at DBS Bank, said that baht recovery has hit resistance level of 32.7 per dollar. The currency’s relative strength index (RSI) has surged to 57.9 on Wednesday compared with 14.4 on 9 August.

The RSI is a gauge used by investors to see whether an asset class is in oversold or overbought territories, with reading above 70 typically seen as overvalued while below 30 is considered to be oversold.

Long term ringgit outlook weak

“Similarly, MYR enjoyed three days of strong gains and hit resistance around 4.20 per USD, also near its 50-day MA [moving average]. RSI returned to 60, back at where it started a 3% depreciation from mid-June to end-July,” he said in a note.

“This week’s movements have not changed our mind that THB and MYR will be weaker three-six months out,” Wee added. Even with the recent uptrend, baht has lost 8.6% of its value against the dollar so far this year, while ringgit shed 3.6%.

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Read more: Thai baht weakens on trade deficit and Fed taper fears

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