Thai Baht Rises Sharply against US Dollar after Fed’s Policy Rate Decision

Thai baht rises sharply against the US dollar following the Fed’s decision to maintain interest rates and a rate cut next year.


The baht rose as much as 1.8% to THB35.06 per US dollar on Thursday, the sharpest single-day rise since November last year for a little over 2.70%, coming down from nearly THB37.00 to THB35.88 per dollar.

The weakening dollar was the result of the U.S. Federal Reserve statement after the two-day meeting last night that pointed to three rate cuts next year.

Interest rates for the U.S. remained unchanged at a 22-year high of 5.25-5.50%, saying that economic growth has slowed since 3Q23. The Fed’s dot plot also showed that most officials see rate cuts in 2024 with a median projection of three.

The Fed mentioning of rate cuts came at a surprise to the market that expected the central bank to remain muted on future moves. Still, the Fed’s projection for rate cuts is still below market expectations by half.

The market expected to see about five rate cuts next year, and could be as much as six. The first cut could be as soon as March with a 70% chance, much higher than 30-50% prior to the meeting. There is also about a 20% chance that the Fed could cut interest rate by 25 basis points next month, according to CME FedWatch Tool.

In addition, the Fed stated that it sees 4.1% unemployment by the end of 2024, while the U.S. economy is expected to grow 2.6% this year and 1.4% in 2024.

Meanwhile, the Dollar Index, which is a basket of US dollars against major currencies in the world, continued to drop by 0.33% to 102.5 on Thursday.