The baht is likely to plunge to 37.25 to the US dollar in the short term, as Asian currencies slumped to their weakest level since 2022 amid continued outflows from both the Thai stock and bond markets, attributed to ongoing global volatility pending US interest rate cuts, say economists.
The Thai currency fell to 36.99 baht to the greenback on Thursday, the lowest in two months, from Wednesday's close of 36.82. The yen slid past the key 160-per-dollar level to a 38-year low, while currencies in the region were largely subdued as the dollar strengthened overnight amid prospects that US interest rates may stay higher for longer.
The baht has softened by 7.7% this year to date, partly because of continued outflows from the Thai stock and bond markets, said Kanjana Chockpisansin, head of the research, banking and financial sector at Kasikorn Research Center.
"We now see 37.25 baht to the dollar as a key resistance level for the baht," she told the Bangkok Post, adding a targeted range in the third quarter is 36-37 baht to the greenback.
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations (Fetco), said the baht has weakened from 36 to the dollar to near 37 now, compared with 34.14 to the dollar at the close of 2023. The currency is likely to slide further as global volatilities linger, said Mr Kobsak.
As the European Central Bank, Bank of England, Swiss National Bank and Bank of Canada have begun to trim their interest rates, all eyes are on the Federal Reserve as the US economy remains sound, he said.
However, the Bank of Thailand is unlikely to cut interest rates this year, according to analysts.
"Views are spilt on the possibility of one or two Fed rate cuts this year. Economic figures signal it may not be easy for the Fed to cut rates twice in 2024," Mr Kobsak told a forum Fetco jointly hosted with the Thai Bond Market Association (ThaiBMA) yesterday.
"It's just a matter of time before the Fed starts actually cutting the US rates. When central banks around the world begin to trim rates in unison, the whole process could take 1.5-2 years to get the work done."
Visit Ongpipattanakul, managing director of Trinity Securities Group, said foreign investors have sold 100 billion baht worth of Thai shares this year. Although outflows have begun to subside, as the Thai economy bottomed out in the first quarter and should begin to recover from the second quarter, statistics indicate Thai and other Asean equities normally decline prior to US presidential elections since 1996.
Somjin Sornpaisarn, president of the ThaiBMA, said foreign investors were net sellers of 60 billion baht worth of Thai bonds in first half of 2024, following net sales of 140 billion last year. The outflows are likely to continue as the yield gap between US and Thai bonds remain significant, he said.
