The baht is anticipated to experience increased volatility and a downward trend this week, driven by uncertainties surrounding the US dollar and the trajectory of the Federal Reserve’s monetary policy.
According to forecasts by Bank of Ayudhya (Krungsri), the baht is expected to fluctuate within a range of 35 to 35.75 baht per dollar this week.
Key factors impacting the movement of the baht include the depreciation and volatility of the dollar, influenced by recent US economic data and the Federal Reserve’s policy direction.
On Tuesday, the baht opened at 35.51 baht per dollar, a decline from Monday’s closing rate of 35.26 baht per dollar, reflecting the latest US economic developments.
On Monday, the baht saw a significant appreciation against the greenback, attributed to a weaker dollar following reports of rising inflation and unemployment rates in July, which heightened concerns about a potential economic recession in the US.
In this context, the market estimates a 70% likelihood that the Federal Reserve will lower its policy rate in September, per Krungsri Global Markets.
Owing to external uncertainties, the baht is expected to continue experiencing volatility against the dollar. However, it recorded its strongest rate against the dollar in five months last week, trading between 35.34 and 35.70 baht per dollar.
Krungthai Global Markets predicts that the baht will remain volatile, weakening to a range of 35.50 to 35.65 baht this week, while SCB Financial Markets expects it to move within 35.35 to 35.55 baht per dollar.
Meanwhile, Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), foresees the Federal Reserve cutting its policy rate three times this year—in September, November, and December—each by a substantial 0.5 percentage points to combat inflation.
This scenario could have significant implications for global capital flows, subsequently affecting Thailand’s capital and money markets. Nonetheless, CIMBT maintains its projection that the Bank of Thailand’s Monetary Policy Committee will reduce the policy rate by 0.25 percentage points in December, decreasing it from 2.5% to 2.25%.
Mr. Amonthep noted that while there are currently no signs of recession in the US economy, it requires close monitoring. Should a recession occur, it could adversely affect Thailand’s manufacturing and export sectors, harming the overall economy.
“If a recession in the US impacts Thailand’s manufacturing and exports, we may need to revise down our GDP growth projection for this year from the current forecast of 2.3%,” Mr. Amonthep stated.
