The baht's strengthening value could breach the band of 30 per US dollar next year, mainly because of Thailand's huge current account surplus, says Krungthai Asset Management (KTAM).
Although pressure inducing the baht appreciation has decreased since the country's current account surplus has dipped from last year's massive accumulation, the surplus still has the potential to strengthen the baht's value at a slower pace, said Somchai Amornthum, executive vice-president of strategic asset allocation and fund marketing at KTAM.
Thailand's current account surplus was US$25.1 billion on a year-to-date basis ending in August. The full-year current account surplus in 2018 was valued at $28.5 billion.
"The baht could break past the 30 per dollar band at some stage next year, but the degree of currency appreciation is not expected to be too strong," said Mr Somchai.
The baht's value against the greenback is projected at 31 this year-end and 30 for year-end 2020, said KTAM.
The baht has been this year's best performing currency in Asia, rising by 7.6% year-to-date, according to Reuters.
The strengthening local currency has hurt exporters and the tourism sector as it means lower sales value of shipments overseas, while foreign tourists earn less when converting their domestic currencies to baht.
The Bank of Thailand has limitations in terms of devising new measures to rein in the baht's appreciation because the current policy interest rate is already low and the pass-through effect of further monetary policy easing is projected to be muted, said Mr Somchai.
The US government's monitoring of foreign exchange intervention by trading partners also adds to existing constraints of Thailand's central bank, he said.
There could be some tweaks made to central bank policies to curb the baht's appreciation, but measures bearing a huge impact are not expected to be rolled out, said Mr Somchai.
The Bank of Thailand cut the volume of short-term bond supply in July and August to help slow fund inflows and prevent currency speculation. The bank also lowered the cap on the outstanding balance of a non-resident account from 300 million baht per person to 200 million, effective from July 22.
