The baht briefly dipped past 33 to the US dollar yesterday while Thai shares extended their losing streak as the trade war between the US and other economic giants showed no sign of abating.
The local currency weakened to 33.02 against the dollar from 32.89 the previous day, with foreign investors continuing to sell Thai bonds and equities.
Kobsit Silpachai, Kasikornbank's (KBank) head of capital market research, predicts the baht will maintain its retreat to 33.14 to the dollar next week.
The SET index tracked the regional trend yesterday, losing 0.78% to 1,622.28 points at the close in moderate trade of 44.1 billion baht. Foreign investors sold a net 2.55 billion baht, raising their year-to-date net sales to 179 billion.
Thai shares have slumped 7.5% year-to-date.
The trade war is a key factor pressuring currencies across the world, while the US Federal Reserve's more hawkish monetary policy stance also dampened sentiment, said Mr Kobsit.
"Right now emotional factors associated with the trade war have more impact than fundamentals. It's quite hard to predict the baht's movement against the dollar. Our expectation is mainly based on technical and seasonal factors," he said.
Investment portfolio reallocation from global fund managers before the end of the first half led to a capital exodus from emerging markets and is also taking a toll on currencies worldwide, said Mr Kobsit.
Despite the baht's weakness, KBank is maintaining its local currency projection at 32 baht against the greenback by the end of the year.
The global markets division at Bank of Ayudhya (BAY) forecast the baht would move in a range of 32.80-33.20 to the dollar this week after it depreciated to a seven-month low of 32.92 last week.
Amid the uncertainty of the trade war, the baht's downward trend should continue for a while as the Fed's rate hikes, which are faster than predicted, and US bond yield spikes prompt further capital outflows from emerging markets, said BAY.
Veeravat Virochpoka, vice-president of Finansia Syrus Securities, said the SET is still pressured by external factors, particularly the US and China trade row, lowering risk appetite for stock investment.
Investors are taking a wait-and-see approach on the ongoing trade war as negotiations between the two largest economies will end on July 7, the effective date for tariff barriers, said Mr Veeravat.
If crude oil prices drop, it could help shore up local stock sentiment, leading to a temporary rebound, he said.