Baht Loses Ground As BoT Flags Intention To Tighten Policy In Gradual Manner

Spot USD/THB has gone bid from the off, with participants digesting cautious comments from a senior BoT official, who sought to pour cold water on hawkish bets inspired by recent comments from his colleagues at the central bank & above-forecast CPI data from earlier this week.

• Spot USD/THB trades +0.198 at THB36.283, with the baht sitting near the bottom of the Asia EM basket. Topside technical focus falls on Jan 18, 2016 high of THB36.382. A break here would open up Oct 2, 2015 high of THB36.665. Bears need a pullback towards Jun 29 low of THB34.960 to breathe a sigh of relief before looking for a deeper sell-off.
• BoT Asst Gov Piti played down potential for aggressive tightening in Wednesday's interview with Bloomberg. "You need to reach take-off velocity" and "you don't want to slowdown the plane too much before you can reach that," Piti said. He added that the Bank will normalise policy in a "gradual manner," but wants to make sure that baht weakness is not adding "undue pressure" on that front.
• The University of the Thai Chamber of Commerce will publish monthly consumer confidence data later today. Headline index fell to a nine-month low in May as rising energy prices and climbing costs of living are squeezing household budgets.
• Higher energy prices are hurting producers as well. A survey by the Federation of Thai Industries showed that they have bolstered production costs by 20%, which translated into a less than 10pp increase in the prices of goods, with producers struggling to maintain prior sales volumes.