The SET index lost 0.47% for the week, to close on Friday at 1,577.84, as trading turned sloppy. From a technical viewpoint, the ascending channel, which emerged in November, is threatening to break down and the momentum indicator, or MACD, is signaling sell. Fundamentally, the Thai economy is expected to gain momentum and reach its growth potential of 4.3% by 2018, underpinned by hefty state investment and private spending, said Standard Chartered Bank last week in the Bangkok Post.
The USD/THB exchange rate inched 0.23% lower for the week, to close on Friday at 35.00 baht per dollar, as the currency pair continues its range bound movement. The U.S. Dollar index (DXY), a measure of the U.S. dollar value relative to a basket of foreign currencies, closed at 100.95, up just 0.16% for the week, despite that Federal Reserve Chair Janet Yellen gave strong hints that a March rate hike may be on the table. The spot gold price gained another 0.26% for the week, to close at U.S. $1,239.10 per ounce on Friday, while the Japanese yen was up 0.21% against the U.S. dollar.
The yield of Thailand 10-year government bonds lost another 1.29% for the week, to close at 2.68% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 2.42% on Friday, narrowed to 0.26 percentage points. Bank of Thailand Governor Veerathai Santiprabhob told the Nikkei Asian Review in an interview last Friday that Thai bonds currently have low exposure to foreign investors. Non-resident holding of government bonds, Bank of Thailand bonds and state enterprise bonds, is just 8-9% compared to 30-40% in some emerging economies, added Mr. Santiprabhob.
The Bank of Thailand Governor urged businesses and emerging countries in Asia to step up foreign exchange hedging and lower their dependence on foreign currencies and financing. On Wednesday, the U.S. Department of Treasury released their monthly data of foreign holdings of U.S. Treasury securities for December 2016, revealing that Thailand trimmed its U.S. Treasury securities holdings in December by $5.1 billion (about 180 billion baht) and now holds $66.0 billion (about 2.34 trillion baht), while the USD/THB exchange rate topped the 36.0 baht level in mid-December.
The WTI crude spot price edged 0.2% lower for the week, closing at $53.75 per barrel on Friday, while the Brent crude spot price lost 1.57% for the week to close at $55.76 per barrel, despite another bearish EIA weekly report on Wednesday. Crude oil prices rebounded on Thursday, following a Reuters report saying that the Organization of the Petroleum Exporting Countries, or OPEC, may extend its production cut agreement with non-OPEC members.
Short positions in WTI crude oil futures contracts held by producers or merchants totaled more than 703,430 contracts as of February 10, 2017, another record high, according to data from the U.S. Commodity Futures Trading Commission, or CFTC. The open interest dropped 7,215 contracts from a record high last week to 2,183,943 contracts, equivalent to about 2.18 billion barrels of WTI crude oil. Crude oil producers could take short hedge positions to lock in a future selling price to protect against a falling crude oil price. Some banks also require producers to hedge against future price risks as a condition for lending.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by another 9.527 million barrels to a record 518.12 million barrels, excluding the Strategic Petroleum Reserve, in the week ending February 10, compared to the S&P Global Platts forecast for a stockpile increase of 3.25 million barrels. The American Petroleum Institute, or API, inventory data on Tuesday showed a U.S. crude inventory build of 9.9 million barrels.
Separately, the EIA said the weekly U.S. crude oil production decreased 1,000 barrels per day, or bpd, for the week ending February 10, to 8.977 million bpd. U.S. crude oil output increased 16,000 bpd to an average of 8.958 million bpd in February, compared to a January average of 8.942 million bpd. Output has fallen about 6.69% from the peak level of 9.60 million bpd in June 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose another 6 to 597, compared to 316, when the rig count hit the low on June 6, 2016.