The baht is trending toward appreciation against the dollar, potentially reaching 34 or even a stronger position in the near term, following a 13-month high achieved yesterday. This upward movement comes as the Bank of Thailand decided to maintain its policy rate at 2.5%, a move that could attract additional inflows ahead of the U.S. Federal Reserve’s upcoming meeting in September.
After closing at 34.21 on Tuesday, the Thai currency climbed to 34.06 against the dollar early Wednesday, marking its highest level since July 2023, before settling between 34.13 and 34.15.
The baht’s rise aligns with the trend observed in most Asian currencies as the dollar index tumbled to its lowest point since December, amid expectations that the U.S. central bank might adopt a more dovish stance as soon as next month.
Over the past two days, the baht has appreciated over 2% in anticipation of the Bank of Thailand’s meeting on Wednesday, where it opted to keep the policy rate at a decade-high of 2.5%.
“The baht has strengthened rapidly due to ongoing fund inflows, as the market is increasingly confident that the Fed will lower rates in September,” stated Kanjana Chockpisansin, head of research for banking and the financial sector at Kasikorn Research Center (K-Research). K-Research predicts the baht will trade within a range of 34.00-34.20 against the dollar in the short term.
“If the baht continues to strengthen past 34 against the dollar, further appreciation is possible,” she added in an interview with the Bangkok Post.
Asia Plus Securities (ASPS) pointed out that Thailand’s second-quarter GDP growth exceeded market expectations, which has led the central bank to conclude that the current interest rate effectively supports economic and financial stability. “This situation has facilitated fund inflows and solidified the baht’s stability,” ASPS noted.
With the Fed expected to gradually lower U.S. rates from a 23-year high of 5.25-5.5%, and the Bank of Thailand maintaining its policy rate, the interest rate gap between Thailand and the U.S. will narrow. “This reduced gap of 0.25 percentage points could result in the baht appreciating by 0.70 against the dollar,” the brokerage added. “If the Fed cuts U.S. rates by 0.25-0.50 percentage points as anticipated, the Thai currency could strengthen by 0.7-1.4 baht relative to the dollar.”
Caretaker Finance Minister Pichai Chunhavajira downplayed concerns over the baht’s strengthening on Wednesday, stating that the local currency reflects market confidence, which has led to a rise in capital inflows into Thailand. He reassured that such fluctuations are manageable and do not warrant concern, while emphasizing that Thai entrepreneurs should adapt by enhancing the quality of their products.
