The baht traded at a two-month high on Monday and is expected to remain strong until year-end as the market considers whether the Federal Reserve might cut interest rates sooner than previously forecast in 2024, say analysts.
Kasikorn Research Center (K-Research) said the baht traded in a range of 35.45-35.47 to the dollar on Monday morning, easing from a two-month high of 35.41 baht last Friday.
The South Korean won and Indonesian rupiah led gains among regional peers compared with the US dollar.
The dollar has been under pressure since investors became convinced the Fed is finished with interest rate hikes, while recent US job data suggested the labour market is softer than expected, said the unit of Kasikornbank (KBank).
US non-farm payrolls increased by only 150,000 in October, lower than the market estimate of 188,000, while the unemployment rate was 3.9%, compared with the forecast of 3.8%.
"The market sees a possibility the Fed might start to cut rates earlier than the second half of next year, which was the previous estimate," Kanjana Chockpisansin, head of research at the think tank, told the Bangkok Post.
This year the baht has weakened against the dollar "less than other regional currencies" at 2.3% and ranks third in terms of volatility at 8.9%, compared with 9.65% for the yen and 9.59% for the won. The Thai currency hit a 10-month high of 32.57 to the dollar on Jan 23 and fell to an 11-month low of 37.24 to the greenback on Oct 4, she said.
Citing a discussion with KBank, Ms Kanjana said the baht should remain strong in the last two months of 2023 based on seasonality, when high demand for the baht from the tourism and export sectors usually pushes the currency to appreciate.
Poon Panichpibool, market strategist at Krungthai Bank, said the Fed will likely cut US interest rates in May next year, sooner than the market forecast of the second half of 2024, with a possible rate cut of 1%. After easing significantly following the Fed's meeting at the beginning of this month, the dollar would remain sideways down amid uncertainties surrounding the war in the Middle East, he said.