The baht's strength is expected to continue throughout this year, buoyed by Thailand's increased surpluses in current account and trade balance coupled with flat growth in imports, says Kasikornbank (KBank).
The local currency's value is forecast to hover around 29.75 against the US dollar in the first half before appreciating to 29.25 by the end of the year, said Kobsidthi Silpachai, KBank's head of capital markets research.
On Dec 30, the baht touched a six-year high of 29.90 per dollar before depreciating into the 30s in 2020. Anaemic trade volume as the holidays approached allowed some investors to easily manipulate the baht, while the country's economic fundamentals also contributed to the previous gain.
The baht was Asia's best-performing currency last year, rising by more than 7%, according to Reuters.
Despite subdued economic growth, the baht gained from the country's massive current account surplus, inflows of tourism revenue and near-record foreign reserves.
Ample foreign reserves have made Thailand stand out as a safe haven to park capital, either for actual investment or speculation.
"We estimate that the country's current account will record a surplus of US$33.8 billion this year, a reflection of imbalances in the economy," Mr Kobsidthi said.
Thailand's current account surplus totalled $33.2 billion as of November 2019, accounting for 5.3% of GDP, according to Bank of Thailand data.
The country's trade surplus with the US was $19 billion in 2019, according to the US Treasury Department.
Although the Bank of Thailand's Monetary Policy Committee is expected to make another 25-basis-point rate cut this quarter to shore up economic growth momentum and fend off appreciation, limited monetary policy space will still put pressure on the baht's upward trend going forward, Mr Kobsidthi said.
Thailand's GDP growth is projected at 2.7% this year, supported by fiscal 2020 disbursement budget and public investment, he said.
Drought is anticipated to incur economic losses of more than 20 billion baht or 0.1% of Thailand's GDP, Mr Kobsidthi said.
If economic losses stemming from drought and fourth-quarter GDP growth data are worse than expected, the 2.7% growth forecast could be downgraded, he said.
The tweak to ease loan-to-value (LTV) regulations is not projected to rev up property sales, he said, as purchasing power has been dented by elevated household debt, which accounts for 79% of GDP.
The ratio of household debt to income is as high as 220%, contributing to a slowdown in private consumption, Mr Kobsidthi said.
The Bank of Thailand has eased the LTV rules governing mortgage lending, shortening the minimum debt-servicing period for first mortgages required for those seeking a second loan for homes priced below 10 million baht.
Another change was lowering the minimum down payment for first mortgages for homes valued at 10 million baht or more.