The baht's appreciation is not expected to be as profound as last year's surge because a lower current account surplus is projected thanks to slower growth in exports and tourism, says Asia Plus Securities (ASP).
The local currency's value against the greenback strengthened from 33 in early April to 31.44 yesterday as of press time.
The baht has become the second best performing regional currency after the Indonesian rupiah, with a 4.6% appreciation gauged, according to ASP.
The main factor contributing to the rising baht is the US dollar weakening as a result of protests against racism in the US and renewed tensions over the US-China trade war, said the securities firm.
Foreign inflows have been detected in local equity and debt securities markets. Month-to-date net foreign inflows into Thai stocks were registered at 5.2 billion baht, while the net inflow amount for local debt securities stood at 13 billion.
The baht was Asia's top performing currency in 2019, ending the year with a value of 29.90 per dollar as investors perceived it as a safe haven because of Thailand's high current account surplus and foreign reserves.
Despite the recent rally, the baht is not expected to log a 10% appreciation akin to last year's surge, said ASP.
Capital flows from Thailand's current account surplus will not be as high as last year's surplus of US$37.7 billion because the country's trade surplus is likely to reduce as Thai exports will be sluggish based on the global economic slowdown, said ASP.
Customs-based exports rose unexpectedly by 2.1% year-on-year in April, highlighted by gold and aircraft exports. Excluding gold, oil and weaponry, April's exports fell by 7.5% from the same month last year.
A meagre rebound in the tourism industry also contributes to a lower current account surplus as international travel restrictions and progress in developing a vaccine for the coronavirus temper rebound momentum, said ASP.
Thailand recorded zero foreign tourists in April following measures to close borders and ban international passenger flights, which has been extended to June 30 for the latter, to curb the spread of the coronavirus.
The Bank of Thailand is expected to roll out measures to rein in the baht's strength, with possible measures including taxing investors in short-term debt securities.