The baht is expected to experience higher volatility and a weaker trend this week, pressured by uncertainties surrounding the US dollar and the Federal Reserve's monetary policy direction.
The Bank of Ayudhya (Krungsri) forecasts the baht will move in a range of 35-35.75 baht per dollar this week.
The key factors influencing the baht's movement are the depreciation and volatility of the dollar, which are driven by updated US economic data and the monetary policy direction of the US Federal Reserve.
On Tuesday, the baht opened at 35.51 baht per dollar, weakening from Monday's close of 35.26 baht per dollar, in line with the latest US economic data.
On Monday, the baht appreciated significantly compared with the greenback because of the weaker dollar following reports of higher inflation and unemployment rates in July, raising concerns about a potential US economic recession.
In this context, the market assesses a 70% probability that the Fed will cut its policy rate in September, according to Krungsri Global Markets.
Given external uncertainties, the baht is expected to experience volatility against the dollar. However, the baht recorded its strongest rate in five months against the dollar last week, moving in a range of 35.34-35.70 baht per dollar.
Krungthai Global Markets forecasts the baht will be volatile and weaken to a range of 35.50-35.65 this week, while SCB Financial Markets anticipates the baht will move within 35.35-35.55 baht per dollar.
Separately, Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), believes that the Fed may lower its policy rate three times this year -- in September, November and December -- with significant cuts of 0.5 percentage points on each occasion in an effort to contain inflation.
Under this scenario, it would significantly impact capital flows globally, affecting Thai capital and money markets. However, CIMBT maintains its projection that the Bank of Thailand's Monetary Policy Committee will cut the policy rate by 0.25 percentage points in December this year, from 2.5% to 2.25%.
Mr Amonthep said that while the US economy has not shown signs of recession yet, it needs to be closely monitored.
In the event of a US recession, it could impact Thailand's manufacturing and export sectors, thereby hurting the overall economy.
"If a US recession occurs and affects Thailand's manufacturing and exports, we may have to lower the Thai GDP growth projection for this year below the current forecast of 2.3%," Mr Amonthep said.