Maybank FX Flash: THB - Breakaway Towards 35.00

§     THB: Breakaway Towards 35.00

§  After firmly breaking above the psychological barrier at 34.50 on 22 Jul, the USD/THB has continued to rally above the 34.80-levels at the point of writing. There does not appear to be any specific trigger for this rally, but rather a combination of factor that created the perfect storm for the USD/THB to spike.

§  Domestic growth concerns continue to pick up steam, especially as external demand continues to wane even as global growth is picking up. We are already seeing concerns about exports, private consumption and investment being reflected in the stock market with foreign funds selling a net THB35.82bn in equities year-to-date. More importantly, we are seeing the heaviest selling of Thai equities so far in Jul with foreign funds selling off a net THB20.15bn in equities vs. their purchase of THB14.34bn of government debt. The latter has failed to stem the climb in the USD/THB. In addition, the weak THB policy of the government also exacerbated the THB weakness.

§  Weekly momentum continues to indicate a bullish bias. USD/THB is expected to gather further upside momentum on weekly close above 34.58 (76.4% Fibonacci retracement of 2009 peak to 2013 trough). Next level on the upside puts the psychological level of 35-figure in focus ahead of the next at 35.75 and the 2009 high of 36.44.