The baht is likely to recover and strengthen to 33-34 to the US dollar by the end of 2023, as the greenback could go into reverse and start to depreciate in six months, says SCB Chief Investment Office (CIO).
The Thai currency traded below 35 baht to the dollar yesterday, moving in a range of 35.15 to 35.38, amid continued concerns over US interest rate hikes. The baht, analysts said, was under pressure from capital outflows from the Thai stock and bond markets amid the dollar appreciation.
The baht has weakened by 5.2% this year.
The dollar's short-term appreciation is one of the factors contributing to the baht's short-term depreciation, along with Thailand's modest current account surplus.
However, Thailand's current account balance surplus is likely to grow in the medium to long term as tourism continues to recover, said Sornchai Suneta, executive vice-president of SCB CIO.
The US currency is expected to experience a short-term appreciation, causing the baht to depreciate, after the US Federal Reserve signalled it would continue to battle inflation through interest rate hikes.
SCB CIO expects the Fed to lift rates for a final time in May, bringing the US terminal rate for this year to 5.25%.
"After this hike, the US dollar could reverse and begin to depreciate again over the medium to long term, which is expected to be more than six months," said Mr Sornchai.
Following China's reopening of its borders, SCB EIC upgraded its estimate for international visitors in 2023 to 30 million, from 28.3 million, and believes foreign arrivals will equal the 2019 record of just below 40 million in 2024.
SCB CIO projects the baht to recover and strengthen, reaching a rate of 33-34 to the dollar by year-end, Mr Sornchai said.
According to Kasikorn Research Center, the baht is expected to trade around 34.50-35.30 to the dollar this week.
"Key factors to monitor include the trend of foreign investments, the movement of Asian currencies, as well as export figures and Thailand's economic figures for January," said the research house.
Mr Sornchai said if the baht does not fall below 35 baht to the doller, it would be a good opportunity to exchange baht for dollars to diversify portfolios offshore, as the yield would provide higher returns than investing solely onshore.
Yields on US treasuries, for example, were elevated this month to a risk-free rate, significantly higher than those of Thai government bonds.
"In particular, US treasuries with maturities between one month and one year yield roughly 4-5%, whereas Thai treasuries with the same tenure range only provide returns at a level lower than 2%," he said.