The Bank of Thailand's intervention to stabilise the baht could whittle down local exporters and importers' appetite to hedge against currency risks, says a senior official at Kasikornbank (KBank).
The baht intervention has pros and cons, said head of capital markets research Kobsidthi Silpachai. It would stabilise the currency against the US dollar amid the global market's wild roller-coaster ride but at the same time discourage local exporters and importers from currency hedging.
Central banks across the world have stepped in to manage currencies as the global foreign currency market remains volatile from concerns about when the US Federal Reserve will next raise its interest rates, he said.
Currency intervention is a cycle management instrument rather than structural management, which is pressured by the demand side rather than the supply side.
The Bank of Thailand reportedly stepped in to curb the baht's rapid gain last month after the baht hovered just shy of 34.50 -- its strongest level in more than a year.
The baht yesterday fell slightly to 34.90 to the dollar from Monday's 34.89.
KBank, the country's fourth largest lender by assets, is maintaining its estimate for the baht at 35.50 at the year-end and 36 at the end of next year, though it has revised its projection on the US central bank's rate hikes this year to only one in December from twice previously predicted.
Mr Kobsidthi also forecast the central bank's Monetary Policy Committee will keep its rate unchanged at 1.5% at today's policy rate call as monetary policy is less efficient than fiscal policy in boosting economic growth at the moment.
Public investment is playing a greater role in supporting economic growth as it can prompt private investment, he said.
Separately, Kirida Bhaopichitr, a research director at the Thailand Development Research Institute, forecast a Fed rate hike later this year to early next year, with the Thai central bank holding its fire at Wednesday's meeting.