The baht is anticipated to decline to 37.25 against the US dollar in the short term, as Asian currencies have reached their lowest levels since 2022 due to ongoing outflows from both the Thai stock and bond markets amidst global volatility, pending US interest rate adjustments, economists report.
On Thursday, the Thai currency fell to 36.99 baht per dollar, marking its lowest point in two months, down from Wednesday’s close of 36.82. The yen also dropped below the crucial 160-per-dollar mark to a 38-year low, while regional currencies remained subdued as the dollar strengthened overnight on expectations that US interest rates may remain elevated for a longer period.
The baht has weakened by 7.7% year-to-date, partly due to continuous capital outflows from Thai financial markets, according to Kanjana Chockpisansin, head of research in the banking and financial sector at Kasikorn Research Center.
“We now consider 37.25 baht to the dollar as a significant resistance level for the baht,” she told the Bangkok Post, indicating a projected range of 36 to 37 baht per dollar for the third quarter.
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations (Fetco), noted the baht’s depreciation from 36 to nearly 37 per dollar, compared to 34.14 at the end of 2023. He expects further weakening of the currency as global uncertainties persist.
With the European Central Bank, Bank of England, Swiss National Bank, and Bank of Canada starting to reduce interest rates, all eyes are on the Federal Reserve, given the robust state of the US economy, he said.
Despite these global trends, analysts do not foresee the Bank of Thailand cutting interest rates this year.
“There are differing opinions on the likelihood of one or two rate cuts by the Fed in 2024. Economic indicators suggest that it may not be straightforward for the Fed to implement two rate cuts this year,” Mr. Kobsak remarked during a forum hosted jointly by Fetco and the Thai Bond Market Association (ThaiBMA).
He added, “It’s only a matter of time before the Fed begins to actually reduce US rates. When central banks worldwide commence rate reductions in concert, the entire process could span 1.5-2 years.”
Visit Ongpipattanakul, managing director of Trinity Securities Group, highlighted that foreign investors have sold 100 billion baht worth of Thai stocks this year. Although outflows have started to decrease, he noted that Thai equities, along with other ASEAN markets, typically experience declines before US presidential elections, a pattern observed since 1996.
Somjin Sornpaisarn, president of ThaiBMA, reported that foreign investors sold net 60 billion baht worth of Thai bonds in the first half of 2024, following net sales of 140 billion last year. He expects these outflows to continue due to the substantial yield gap between US and Thai bonds.
