The baht is expected to strengthen against the greenback this week, potentially reaching 33.50-33.75 baht per dollar, following its rise to the highest level in 13 months. This appreciation is largely driven by the weakening dollar, which has been impacted by the US Federal Reserve's signal of a potential rate cut next month.
The baht has appreciated past 34 baht per dollar since Friday, fluctuating between 33.90-34.27 baht against the greenback. On Monday, the Thai currency opened at 33.98 per dollar, strengthening from last week's closing rate of 34.25 against the greenback.
During Monday's trading session, the baht reached a high of 33.88 per dollar, marking its strongest level in 13 months, primarily due to the weakening dollar, according to Kasikorn Research Center (K-Research).
Kanjana Chockpisansin, head of research for the banking and financial sector at K-Research, noted that the dollar's depreciation, coupled with rising global gold prices, has supported the baht's gains against the greenback.
The US dollar also fell compared with other currencies worldwide, with sterling hitting its highest level in over two years on Friday, following Federal Reserve Chair Jerome Powell's clear signal that the long-anticipated US interest rate cut is likely to happen next month.
"The baht is expected to continue appreciating against the dollar, potentially moving within a range of 33.50-34.50 baht per dollar this week," Ms Kanjana noted.
Year-to-date, the baht has strengthened by 0.5% against the dollar. However, it had reached its weakest level in July this year, down 7.9% against the greenback, before beginning its recent appreciation.
The baht's movement this year aligns with trends among regional currencies. The Indonesian rupiah has also appreciated by 0.5% against the dollar, while the Singapore dollar has gained 1.5%. However, the Malaysian ringgit has surged by 5.7% against the dollar.
In contrast, the South Korean won has depreciated by 2.3% against the dollar year-to-date, while the Taiwan dollar has declined by 3.9%, and the Philippine peso has fallen by 1.7%.
Poon Panitchpibun, a money market strategist at Krungthai Global Markets under Bank of Ayudhya (Krungsri), said that after Mr Powell's speech, investors expected the Fed to begin cutting its policy rate in September, with a potential 0.5 percentage point reduction over the last two meetings of the year to support the US labour market.
Furthermore, the market anticipates a 100-basis-point rate cut by the Fed this year, followed by an additional 120-basis-point cut next year.
Separately, Krungsri Global Markets expects the baht to move within a range of 33.74-34.30 baht against the dollar, influenced by the anticipated Fed rate cut. However, it will closely monitor the dollar's movements and the Fed's policy direction this week.
Krungsri Global Markets also predicts that the Bank of Thailand will maintain its policy rate at the upcoming Monetary Policy Committee meeting in October, while closely monitoring overall financial market conditions. If downside risks of financial tightening increase, the central bank may consider a policy rate cut over the subsequent periods, according to Roog Sanguanruang, senior vice-president of Krungsri Global Markets.