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The SET managed to close up 0.29% for the week at 1,394.69 on Friday, up 8.28% year-to-date. The USD/THB exchange rate was quoted at 35.444 baht per dollar on Friday, up 0.89% for the week, while the THB/JPY bounced 0.54% for the week to close at 3.0651 yen per baht. The THB/JPY is now traded below the 3.07 yen per baht resistance level and is about to fall off the cliff.
The Japanese government’s patience may have come to an end and they are about to enter into an all-out global currency war, as Finance Minister Taro Aso threatened on Tuesday to intervene in foreign exchange markets and said that the Japanese government would not tolerate a persistent "one-sided" rise in the yen. He warned that the government was "determined to stop it", according to the Australian Financial Review.
Mr. Aso may be getting some support from certain U.S. Federal Reserve officials who have been talking up the U.S. dollar during the past two weeks. Boston Fed President Eric Rosengren, a voting member of the Federal Open Market Committee (FOMC), said to business leaders during a speech in Concord, New Hampshire on Thursday that the economy appears to be strengthening after the sluggish first-quarter, giving the green light for the U.S. central bank to continue its attempt to normalize their interest-rate policy.
The Bank of Thailand said on Wednesday that it had chosen to leave its benchmark rate unchanged at 1.5%, in line with expectations. The BoT said the Thai economy would grow 3.1% this year. The University of Thai Chamber of Commerce (UTCC) said on Thursday that it revised the growth forecast for the Thailand GDP in 2016 downward to 3%, from 3.5%, citing lingering drought and flat exports.
Last Tuesday, the UTCC said its consumer confidence index dropped to 72.7 points in April, the lowest reading since October 2015. According to the survey reported by the Bangkok Post, people in many areas are increasingly concerned about the adverse impact of the drought, which may affect farm production and income.
The central banks’ actions and statements, as well as uncertainty in the Thai economy, sent the Thailand 10-year bond yield down 1.1% for the week at 1.84% on Friday, down 28.57% year-to-date. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.702% on Friday, is 0.098 percentage points.
Since May 2015, the SET index and WTI crude oil price are highly correlated with a coefficient of 0.82 over a 200-day period, where 1 is total positive correlation. The WTI crude oil spot price ran up 5.54% for the week to close at $47.03 per barrel on Friday, following a crude inventory draw that was more than expected and a bullish report from the International Energy Agency (IEA).
The Energy Information Administration (EIA) weekly U.S. oil inventory report on Wednesday showed a draw of 3.4 million barrels in the week ending May 6, compared to analysts’ expectations for a small build of 300,000 barrels. The American Petroleum Institute (API) inventory data on Tuesday showed U.S. crude inventories rose by 3.45 million barrels to record highs of 543.1 million during the week ended May 6. The gap between the EIA and API data may be related to the uncontrolled wildfire in Canada’s province of Alberta last Wednesday, which shut down one major oil sands mining operation and forced another to curtail production.
The EIA also said the weekly U.S. crude oil production fell again for the fifteenth consecutive week, to 8.802 million barrels per day (bpd) for the week ending May 6, 2016, the lowest level since September 5, 2014, at 8.59 million bpd. Weekly U.S. crude oil output, however, has fallen 8.41% from the peak level of 9.61 million bpd during the week ending June 6, 2015.
More bullish news for the oil market came from Houston-based oilfield services company Baker Hughes Inc., who said on Friday that the U.S. oil rig count is now down another 10 to 318, an 80.24% drop from the peak number of 1,609 in October 2014.
The WTIC crude price jumped 0.94% on Thursday, after the IEA said that global oil stocks will experience a "dramatic reduction" in the second-half of the year on the back of strong demand and falling supply by some major producers. A series of production outages around the globe have also taken barrels out of the market in recent weeks, providing support to prices.
From our technical viewpoint, the SET has been pulling back from the April high of 1,432.25, but continues to trade in a narrow range between the trendline resistance of the ascending channel and 50-day moving average. A bullish golden cross, or the 50-day and 200-day SMA crossover, emerged in mid-April.
The 50-day SMA (green line) and 200-day SMA (red line) are running parallel to, or have merged into, the trendlines, meaning the market is highly black box traded. Keep an eye on the WTIC and the Thai baht, as they trade along with SET. |
