Economists forecast the value of the baht could plunge to 38 to the US dollar this year, mainly attributed to a stronger dollar as the Federal Reserve pursues a hawkish monetary policy.
Kobsidthi Silpachai, head of capital markets research at Kasikornbank (KBank), predicts the baht will depreciate to a range of 36.50-38 against the greenback within the next month.
Continued increases of the federal funds rate will result in the dollar appreciating compared with other currencies, including the baht, he said.
The baht is expected to remain highly volatile, in line with money markets worldwide, because of both external and internal factors, said Mr Kobsidthi.
The Bank of Thailand's Monetary Policy Committee (MPC) is expected to raise its benchmark policy rate by 25 basis points from the current 0.75% at next week's meeting. The rate increase would strengthen the baht to 37 to the dollar next week, but after that the baht would slide as the dollar firms, he said.
KBank estimates the baht will strengthen again later this year, rising to 35 against the dollar at the end of 2022, mainly supported by tourism income.
Moreover, KBank expects the MPC to increase the policy rate by another 25 basis points at its November meeting, sending it to 1.25% at the end of this year, said Mr Kobsidthi.
Speaking at a separate event, Amonthep Chawla, head of the research economist office at CIMB Thai Bank (CIMBT), said the bank forecasts the baht to reach 38 to the dollar because of a stronger dollar, in line with the Fed's hawkish policy rate hikes.
CIMBT believes the Bank of Thailand will increase its policy rate to 1.75% by the end of 2022, then continue with more rate hikes to reach 2.5% at the end of next year.
"We expect the central bank will raise its policy rate two times, each by 50 basis points, this year to contain the spread between Thailand's rate and the fed funds rate. The move should help slow the baht depreciation," he said.
Mr Amonthep proposes the Finance Ministry and central bank change their existing inflation targeting framework to foreign exchange rate targeting to better manage foreign exchange rate stability.
The stronger dollar will also affect other currencies in the region, particularly the yuan, as well as the baht, he said.
Mr Amonthep said rising inflation is a key factor making the central bank continue to raise its policy rate. CIMBT forecasts the inflation rate will be 6.2% on average for this year, declining to 2.6% next year.
Despite the high inflation rate, the economy should continue to recover, largely thanks to a recovery in the tourism sector, according to CIMBT.
CIMBT upgraded its outlook for the country's GDP growth in 2022 to 3.2% from its earlier projection of 3.1%.