Baht to hit 37.25 per US dollar amid global currency slump

The Thai baht is expected to plummet to 37.25 against the US dollar in the near future, as Asian currencies have weakened to their lowest levels since 2022. This decline is driven by ongoing global volatility and outflows from Thai stock and bond markets amid uncertainty surrounding US interest rate cuts, according to economists.

The Thai currency yesterday dropped to 36.99 baht per US dollar, marking its lowest point in two months, down from the previous day’s close of 36.82. The yen also fell past the crucial 160-per-dollar level, reaching a 38-year low, while other regional currencies remained subdued due to the dollar’s overnight strength, fuelled by expectations that US interest rates may remain elevated for an extended period.

Kanjana Chockpisansin, head of research for banking and financial sectors at Kasikorn Research Centre, noted that the baht has depreciated by 7.7% since the beginning of the year. This decline is partly attributed to continuous outflows from the Thai stock and bond markets, said Kanjana, adding that the projected range for the third quarter is between 36 and 37 baht to the greenback.

“We now see 37.25 baht to the dollar as a key resistance level for the baht.”

Kobsak Pootrakool, chair of the Federation of Thai Capital Market Organizations (FETCO), observed that the baht has weakened from 36 to nearly 37 against the dollar, compared to 34.14 at the end of 2023. He predicts further declines as global uncertainties persist.

As the European Central Bank, Bank of England, Swiss National Bank, and Bank of Canada have started reducing their interest rates, attention is focused on the Federal Reserve, given the robustness of the US economy.

Rate cuts

Analysts, however, assert that the Bank of Thailand is unlikely to reduce interest rates this year, said Kobsak at a forum jointly hosted by FETCO and the Thai Bond Market Association (ThaiBMA).

“Opinions are divided on the likelihood of one or two Fed rate cuts this year. Economic indicators suggest it may not be easy for the Fed to cut rates twice in 2024.

“It’s just a matter of time before the Fed begins cutting US rates. Once central banks globally start reducing rates in unison, the entire process could take 1.5 to 2 years to complete.”

Visit Ongpipattanakul, Managing Director of Trinity Securities Group, revealed that foreign investors have sold 100 billion baht worth of Thai shares this year. Although outflows have started to diminish as the Thai economy hit its lowest point in the first quarter and is expected to recover from the second quarter, historical data shows that Thai and other ASEAN equities typically declined before the US presidential elections since 1996.

Somjin Sornpaisarn, president of the ThaiBMA, reported that foreign investors were net sellers of 60 billion baht worth of Thai bonds in the first half of 2024, following net sales of 140 billion baht last year. He anticipates that outflows will persist due to the significant yield gap between US and Thai bonds.