The baht could appreciate past the key psychological level of 33 to the US dollar in the second quarter after the currency strengthened to a six-month high on Thursday, amid the intensifying US-China trade war, says Kasikorn Research Center (K-Research).
The Thai currency traded at 33.18-33.20 to the greenback Thursday morning, easing from an overnight rate of 33.08 to the dollar, said Kanjana Chockpisansin, head of research, banking and finance at the Kasikornbank think tank.
The baht has strengthened recently in line with other Asian currencies as the dollar depreciated on a weakening US economic outlook since President Donald Trump announced reciprocal tariffs earlier this month.
The baht has also been supported by skyrocketing gold prices, which hit a fresh record high of US$3,357.78 an ounce Thursday, noted K-Research.
The dollar index (the value of the US dollar relative to a basket of foreign currencies) has depreciated by 8% this year, while the baht gained 2.4% from 34.10 to the dollar at the end of 2024.
According to Ms Kanjana, there has been a capital flight from the dollar to other major currencies, particularly the yen and Swiss franc, which have appreciated 10.2% and 11.1% respectively year-to-date.
"The baht could appreciate beyond the key range of 33 to the dollar this quarter if the confrontations between the US and key trading partners, especially China, are prolonged or intensify. This scenario would cause the dollar to weaken further," she told the Bangkok Post.
As of April 16, foreign capital worth 46.9 billion baht flowed out of the Stock Exchange of Thailand year-to-date, compared with outflows of 148 billion for the entire 2024.
However, foreign capital valued at 38.2 billion baht flowed into the Thai bond market for the period, according to K-Research.
While warning Trump tariffs could trigger US inflation to spike, Federal Reserve chair Jerome Powell said on Wednesday the Fed would wait for more data on the economy's direction before changing interest rates.
Yet Mr Powell referenced a potentially tough situation developing in which prices are pushed higher by tariffs, while growth and possibly the labour market weaken, nudging both inflation and employment further away from the Fed's desired levels.
"The market has begun to speculate that if inflation rises because of Trump's tariff policies, the Fed might slash rates at its May 6-7 meeting, earlier than the previous projected cut in June," said Ms Kanjana.