The baht has posted a short-term gain, rising to a two-week high of stronger than 36.5 to the dollar on Thursday, but Kiatnakin Phatra Financial Group (KKP) warns the Thai currency could depreciate because of Thailand's structural problems.
The baht led Asian currency gains on Thursday, advancing 0.3% to its highest level since May 23, while the Singapore dollar rose 0.2%. The Thai currency was traded at 36.69 baht to the greenback on Wednesday, strengthening from a low of 36.9 baht on May 30.
Kanjana Chockpisansin, head of the research, banking and financial sector at Kasikorn Research Center (K-Research), said the baht strengthened significantly overnight on profit-taking of dollars ahead of the European Central Bank's decision on interest rates late Thursday and the United States Federal Reserve meeting next week.
"The baht could even strengthen past 36.5 to the dollar for a short while, but we remain firm on the near-term forecast of 36.5-37 baht as key economic factors haven't changed much from what we saw earlier," she told the Bangkok Post.
This year-to-date the baht has weakened by 6.35%, the yen has depreciated by 9.39% and the Korean won has declined by 6.19%. The Philippine peso and Indonesian rupiah have weakened by 5.61% and 5.47%, respectively.
KKP expects the baht to remain on a weakening trend against the greenback, noting the Thai currency cannot return to the pre-pandemic level of around 30 baht per dollar based on the country's structural problems.
The baht has depreciated this year against the dollar as the greenback rose on hawkish Fed comments concerning US rates. Thailand's various structural economic problems represent a key factor pressuring the baht's value against the dollar, said the financial group.
"We are concerned the baht will stay on a depreciation trend against the greenback permanently. The local currency cannot move back to the pre-pandemic level of around 30 baht to the dollar, similar to the experience of Malaysia's ringgit," KKP said in its recent research.
Thailand's current account has continued to decline post-pandemic, pressured by the country's shrinking export competitiveness and low level of energy security, said the firm.
According to the Bank of Thailand's (BoT) economic update in April, the baht depreciated based on external factors, which included changes in market expectations regarding the Fed's anticipated interest rate cut and concerns Middle East conflicts could escalate.
The currency averaged 36.77 baht to the dollar in April, down 3% month-on-month, then strengthened to 36.61 baht against the greenback in May.
