The baht is expected to surpass 29.50 per dollar this week, a level unseen since the local currency was floated in July 1997, thanks to numerous factors supporting investor confidence, says a local banker.
Tak Bunnag, head of treasury at Bank of Ayudhaya, also predicts the baht to continue to strengthen if it breaks the major resistance line at 29.50 baht, shooting past 29.00 later this year.
"If it passes the strong resistance level, we will see the baht in the high 28s briefly later this year, mainly due to continuing foreign capital inflows," said Mr Tak, adding the magnitude of the appreciation depends on the country's economic condition.
Foreign investors still see an opportunity to gain from several assets here, resulting in baht appreciation.
On Friday, the baht roared to a 28-month high at 29.52 against the greenback before falling to 29.53/57 to the dollar yesterday.
Positive factors include the recent upgrade of Thailand's credit rating by Fitch Ratings one notch to BBB+, a 19-month high in consumer confidence, and the central bank's possible increase of Thai growth for this year.
The baht has gained 3.27% this year, outpacing other regional currencies, with the Philippines' peso at 1.25%.
Holding of central bank bonds by non-residents rose from US$211.29 billion or 6.77% in November 2012 to $284.14 billion or 9.07% in February of this year.
Even 25-26 baht a dollar, the level before the 1997 financial crisis struck, is possible within two years, said Sompop Manarungsan, president of Panyapiwat Institute of Technology.
Mr Sompop added an interest rate cut would not weaken the baht, but authorities should be wary of household debt, which is now surging to 80% of gross domestic product.
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Writer: Somruedi Banchongduang & Phusadee Arunmas