The baht is poised to experience significant pressure, potentially reaching 37 baht per United States dollar next week, as a result of better-than-expected economic data from the US coupled with the US Federal Reserve's decision to hold off on interest rate cuts.
Opening at 36.76 baht against the greenback on Friday, the baht experienced a notable depreciation from its previous day's closing rate of 36.38 baht.
Poon Panichpibool, a global market strategist at Krungthai Bank (KTB), said the dollar rose across the board, particularly against the Japanese yen, reaching its highest level since the mid-1990s following a higher-than-anticipated rise in US inflation in March.
The baht declined significantly compared with the greenback.
According to data from the US Department of Labor, the consumer price index rose by 3.5% year-on-year in March, accelerating from a 3.2% increase in February.
Core consumer price inflation, an indicator that excludes the volatile food and gas prices, and serves as a metric for assessing price stability, climbed 3.8% year-on-year in March, maintaining the same growth pace as seen in February.
Given the US latest data, financial markets foresee the Fed delaying interest rate cuts until September.
The Fed Fund rate reduction is expected to occur once if at all this year, down from previous forecasts that suggested there would be three to four rate cuts.
Under this scenario, the dollar is expected to strengthen further and exert continuous downward pressure on the baht which could test the rate of 37 to the dollar in the near future, Mr Poon said.
Speaking after the Bank of Thailand's (BoT) Monetary Policy Committee's (MPC) meeting on Wednesday, MPC Secretary Piti Disyatat said the baht showed the lowest rate among regional currencies against the dollar in the year-to-date.
According to the MPC's statement, the baht's volatility against the US dollar has risen, leading to greater depreciation compared to other regional currencies.
This is attributed to the Fed's monetary policy and domestic economic and financial developments. The MPC has pledged to maintain its vigilant oversight of foreign exchange market fluctuations.
Roong Sanguanruang, head of global markets and research at Bank of Ayudhya (Krungsri), said the baht may test the 37 level in the coming week, attributing it to dollar appreciation in line with US economic trends.
Additionally, the Fed is expected to delay the first policy rate cut from the previous assessment in June. There could only be two rate cuts this year, she added.
"After the Songkran water festival, the baht is expected to persist in weakening and could potentially test the 37-baht mark against the dollar, primarily influenced by the direction of Fed Fund rates," Ms Roong said.