The depreciating baht could be weakened further by the Bank of Thailand's recent measures to relax curbs on movement of capital flows, says Deputy Prime Minister MR Pridiyathorn Devakula.
"These measures will create more balance between buying and selling. Now we have started to see [the baht] falling, but it could be weaker as the measures have just been announced," he said.
The measures allow more opportunities for Thai investors to purchase or borrow a greater amount of foreign currencies, while the limit on buying or seeking loans offered in baht has been raised for foreigners, said MR Pridiyathorn.
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Thailand's financial system has registered a substantial amount of US dollars, as indicated by the country's current account and trade surpluses, but the recent measures will open more channels for buying the dollar and selling the baht, he said.
According to the new rules, Thais can purchase foreign currencies for deposit of up to a limit of US$5 million compared with $500,000 previously, while the purchase value of properties abroad will be raised to $50 million per year from $10 million.
The limit for non-residents in borrowing the baht from domestic financial institutions for transactions undertaken without underlying trade and investment in Thailand will be doubled to 600 million baht
MR Pridiyathorn said an export recovery in the second half would depend on the condition of foreign economies, but the weakening baht was helping the export sector and the central bank's measures had supported the baht's depreciating trend.
A weaker baht would benefit exporters' shipment value, but importers would face higher costs for importing foreign merchandise.
In Bangkok, the baht has fallen almost 3% since the rate cut was announced on April 29, from 32.22 per US dollar to 33.18. On the far more important New York currency exchange, baht-to-dollar rates were also down but less dramatically. Data on Friday showed the baht has dropped from 32.83 per US$1 on April 30 to 33.24 - a fall of just 1.3%.
Although commercial banks have yet to lower their interest rates despite the central bank's Monetary Policy Committee (MPC) cutting the policy interest rate in March and April, the government hopes that the successive rate cuts will support the baht's depreciation because of improved prospects of lower commercial interest rates and economic stimulation, he said.
The rate-setting committee late last month surprisingly slashed the policy rate by a quarter-percentage point for the second straight meeting to 1.5%, a move the central bank described as a harsh drug to ward off downside risks to growth after finding growth was likely to lose momentum in the period ahead.
The weakening baht should help Thailand's economic recovery momentum to gain traction, but the currency's movement is affected by both internal and external factors, said Bank of Thailand governor Prasarn Trairatvorakul.
He said several factors had influenced the weakening baht over the past week, such as the MPC's consecutive rate cuts, the central bank's eased regulations on capital flows, the US's strong economic data and the recent long holidays prompting foreign currency holders to hedge foreign exchange risks.
"Continuous monitoring has to be made to see whether the baht will weaken further because there are domestic and external factors involved," said Mr Prasarn.
"But my opinion is that the current weakening baht is beneficial for an economic recovery, as it was [previously] strong compared with other currencies."
Mr Prasarn reiterated that several factors were causing the baht's depreciation and no specific measure was targeted at boosting currency depreciation.
Thailand's economic conditions are not considered as deflation despite how core inflation has softened on the back of lower domestic demand, said Mr Prasarn, citing the low unemployment rate, private consumption and prevailing economic activities as evidence.
The MPC had decided to implement a pre-emptive move to reduce downside risks to economic growth through last month's cut in the policy interest rate, he added.
MPC secretary Mathee Supapongse said after the recent cut that there was still room to manoeuvre in response to conditions.