The baht is projected to appreciate against the US dollar this week, potentially reaching between 33.50 and 33.75 baht per dollar, following its recent rise to the highest level in 13 months. This strengthening is primarily attributed to the weakening of the dollar, influenced by signals from the US Federal Reserve regarding a possible rate cut next month.
Since last Friday, the baht has traded below 34 baht per dollar, fluctuating between 33.90 and 34.27 baht against the greenback. On Monday, it opened at 33.98 per dollar, a strengthening compared to last week’s close of 34.25.
During Monday’s trading, the baht even reached a high of 33.88 per dollar, its strongest level in over a year, mainly due to the falling dollar, according to the Kasikorn Research Center (K-Research).
Kanjana Chockpisansin, head of banking and finance research at K-Research, explained that the depreciation of the dollar, along with rising global gold prices, has contributed to the baht’s appreciation against the greenback.
Globally, the US dollar weakened against other currencies, with the British pound reaching a two-year high on Friday following a clear indication from Federal Reserve Chair Jerome Powell that the long-anticipated interest rate cut in the US is likely to occur next month.
“The baht is expected to continue its upward trend against the dollar, potentially trading within a range of 33.50 to 34.50 baht per dollar this week,” Ms. Kanjana added.
So far this year, the baht has appreciated by 0.5% against the dollar, recovering from a low in July when it was down 7.9% against the greenback before recent gains began.
The baht’s performance this year has mirrored trends seen in other regional currencies. The Indonesian rupiah has also risen by 0.5% against the dollar, while the Singapore dollar is up by 1.5%. In contrast, the Malaysian ringgit experienced a notable increase of 5.7% against the dollar.
However, several currencies have struggled, with the South Korean won depreciating by 2.3% against the dollar year-to-date, the Taiwan dollar falling by 3.9%, and the Philippine peso declining by 1.7%.
Poon Panitchpibun, a money market strategist at Krungthai Global Markets, part of Bank of Ayudhya (Krungsri), noted that following Mr. Powell’s speech, investors expect the Fed to start reducing its policy rate in September, potentially decreasing it by 0.5 percentage points over the last two meetings of the year to support the US labor market.
The market anticipates a total of a 100-basis-point rate reduction by the Fed this year, with an additional 120-basis-point cut projected for the next year.
Separately, Krungsri Global Markets forecasts the baht will likely trade between 33.74 and 34.30 baht against the dollar, influenced by expectations of the Fed rate cut. They will closely monitor the dollar’s movement and the Federal Reserve’s policy direction in the coming week.
Additionally, Krungsri Global Markets expects the Bank of Thailand to keep its policy rate unchanged at the upcoming Monetary Policy Committee meeting in October while observing overall financial market conditions. If concerns about financial tightening increase, the central bank may consider a rate cut in subsequent periods, according to Roog Sanguanruang, senior vice-president of Krungsri Global Markets.
