The baht is likely to appreciate further as the local currency is less sensitive towards global risks, with limited room to manoeuvre Thailand's monetary policy seen as an attribute, says Kasikornbank (KBank).
The baht's value is less prone to external volatility compared with other currencies in Asian emerging markets because the local currency's fundamentals are backed by Thailand's current account surplus, low inflation and high foreign reserves, said Kobsidthi Silpachai, head of capital markets research at KBank.
The Bank of Thailand's limited policy space for further monetary easing also adds to the baht's strengthening outlook, said Mr Kobsidthi.
The baht is Asia's best performing currency year-to-date, appreciating 6.41%, according to Reuters.
The Bank of Thailand's Monetary Policy Committee (MPC) on Wednesday held the benchmark interest rate at 1.5% after making a 25-basis-point cut in August to shore up domestic economic growth momentum following export contractions affecting domestic demand.
The baht's value against the greenback is expected around 30.50 this year, staying within the 30 baht-per-dollar range, said KBank.
"But the baht's value could depreciate at a fast pace because of heightening concerns over economic conditions. This could prompt market participants to become more concerned about investing in emerging markets, resulting in capital outflows from Thailand to the US," said Mr Kobsidthi.
"Previously, foreign holding of short-term Thai debt securities was valued at around 170 billion baht, but the figure has dwindled to 61 billion. Foreign capital did not disappear, but moved into long-term debt securities worth 800-900 billion baht, causing the baht's value to remain firm."
He said the MPC is expected to make another rate cut later this year, but the move will not help mitigate the baht's strength and fend off capital inflows as Thailand's sovereign credit rating is on the verge of an upgrade by international credit rating agencies.
Thailand's GDP growth is projected in a range of 2.7-2.9% this year, down from 3.1% previously, with exports tipped to contract by 2%, said Mr Kobsidthi.
The government's 1,000-baht cash giveaway and 15% cash rebate scheme are expected to have a limited effect on economic growth as they target consumer spending, while private consumption is muted, weighed down by household debt, he said.
