The baht may strengthen past 33 per dollar, rising from 33.40 as of Tuesday, if the Bank of Thailand opts to maintain its policy interest rate at 2.50% during Wednesday’s meeting, according to Kasikorn Research Center (K-Research).
Kanjana Chockpisansin, head of research for K-Research’s banking and financial sector, stated that the Thai currency is projected to fluctuate between 32.90 and 33.70 to the dollar this week.
Early Tuesday, the baht was trading at 33.25/27, down from Friday’s close of 33.34, but it weakened to around 33.40 by midday. The dollar remained strong, hovering near a two-month high, while investors grew cautious ahead of significant monetary policy decisions expected this week.
“Regional currencies are reacting to the market’s disappointment regarding China’s economic stimulus package announced over the weekend,” Ms. Kanjana told the Bangkok Post.
“At the same time, the dollar continues to be supported by the perception that the Federal Reserve may reduce US rates less than previously anticipated, as economic data remains robust.”
Ms. Kanjana noted that the market anticipates the Fed will cut the federal funds rate by no more than 25 basis points (bps) at its remaining two meetings this year, or potentially refrain from further reductions, following a 50bps cut last month. This outlook marks a significant shift from the formerly expected 50bps reduction.
In Thailand, K-Research anticipates that the central bank’s Monetary Policy Committee will maintain the policy rate at a ten-year high of 2.50% during its Wednesday meeting.
“If Thai rates remain unchanged, foreign capital is likely to flow in, pushing the baht to potentially appreciate to around 32.90 to the dollar,” Ms. Kanjana mentioned, noting that the last time the baht was above 33 was on October 2.
K-Research predicts that the Thai currency will conclude the year trading between 33 and 34 to the dollar, a stronger forecast than the previously anticipated 34.50.
Rakpong Chaisuparakul, senior vice president at KGI Securities (Thailand), suggested “there is a strong likelihood of the baht strengthening” as the central bank is expected to keep its benchmark rate steady.
He anticipates that the MPC statement following Wednesday’s meeting will indicate that “the current level is appropriate and supports economic growth.”
Kanyapak Tantipipatpong, an adviser to the Thai National Shippers’ Council, expressed that exporters would appreciate the central bank focusing more on stabilizing the baht.
“The baht has experienced significant volatility lately, making it challenging for Thai exporters to manage their cash flow,” she said. “The private sector would understand if the baht fluctuates in alignment with regional currencies.”
