The baht is likely to remain highly volatile due to external factors but its weakness is in line with moves in regional currencies, the Bank of Thailand said on Wednesday.
The baht and regional currencies have moved both directions in accordance with global financial market conditions due to uncertainty over the US monetary policy and the recovery of China’s economy since its reopening, the central bank said.
US Federal Reserve chairman Jerome Powell struck an unexpectedly hawkish tone on inflation and interest rates on Tuesday, which has strengthened the dollar and caused other currencies and the baht to weaken.
The baht fell by 1.4% against the dollar on Wednesday, reaching a one-week low around 34.50. The currency has moved in a wide range in the last few months, from a low of 38.30 in October to a high of 32.60 on Jan 21.
The central bank said in a statement that foreign investors had been net sellers of about $2 billion worth of Thai assets so far this year. Last year, foreigners made the highest net purchases on record of Thai stocks.
The private sector should hedge against currency risks to mitigate the impact of still high volatility in the financial markets, the central bank said.
Locally, inflation is expected to fall further and return to the central bank’s target range of 1% to 3% this year, helped by support measures, Finance Minister Arkhom Termpittayapaisith said on Wednesday.
The government will continue to help ease the impact of energy prices, which will help hold down consumer prices, he told reporters.
“The economy is not considered hot, it’s still in recovery, with consumption and tourism starting to rebound,” he said.
Headline inflation dropped to its lowest rate in 13 months at 3.8% in February, but was still above the central bank’s range, suggesting it will raise its key interest rate further at its next meeting on March 29.
The BoT has raised its policy rate by a total 100 basis points since August to 1.50% to contain price pressures.