The Bank of Thailand is expected to scale back its interventions in the foreign exchange market amid concerns they could prompt the wrath of the US and place Thailand on a currency manipulation watchlist, says a Kasikornbank (KBank) senior executive.
The assumption is based on the country's foreign reserves being relatively steady in recent weeks, while the baht's run-up continues, said capital market research head Kobsit Silpachai.
Anxiety that the US could brand Thailand a currency manipulator has slowed down the central bank's intervention in the foreign exchange market, he said.
Thailand's current account surplus was 10.3% of the country's GDP last year, while foreign reserves dropped slightly to US$213 billion (6.7 trillion baht) as of Feb 9, down from $214 billion on Feb 2.
According to the US Treasury's criteria for the watch list, countries that are branded as potential currency manipulators must have a current account surplus of more than 3% of GDP, a trade surplus of above $20 billion with the US, and a persistent one-sized currency intervention totalling more than 2% of GDP over 12 months.
With the baht making brisk gains against the US dollar since January, KBank revised up its forecasts on the Thai currency for the second time to 30.8 baht to the dollar.
The baht is expected to hit that mark in April because of the higher current account surplus, driven by income from tourism and exports, as well as portfolio investment in Thai bonds, he said.
But Mr Kobsit predicted the baht would reverse the trend in May in light of a repatriation-driven dividend.
Some SET-listed companies announced they would pay a combined 37 billion baht in dividends for their 2017 operations, while listed companies' dividend announcement season is ongoing. Those firms paid out 70 billion baht in 2016.
Mr Kobsit said the local currency will be more volatile throughout the year amid both local and international uncertainties. US monetary policy is the main factor pressuring the dollar against other currencies worldwide.
Thailand's structural problems will push the baht to be more volatile than regional peers, he said.
KBank, the country's fourth-largest lender by assets, predicts the baht will appreciate to 31.2 baht versus the dollar next month. The baht, which has risen 3.7% against the dollar, is the best performing currency in Asia this year.