Thai baht could depreciate further against US dollar, says K-Research

The Thai baht, already experiencing a downward trend, could further depreciate against the US dollar, potentially reaching 36 baht to a dollar, according to Kasikorn Research Centre (K-Research). This forecast is contingent upon robust US economic data, set to be released later this week, which could indicate a resilient US economy. Additionally, any delays in the Federal Reserve’s proposed trimming of interest rates could contribute to this scenario.

K-Research has noted continued capital outflows due to Thailand’s weaker-than-expected economic results. The baht was trading between 35.76-78 against the US dollar on Thursday, a slight depreciation from Wednesday’s closing rate of 35.68, following the release of the US Manufacturing and Services Purchasing Managers’ Indices for January. Both indices recorded their highest levels in over half a year, causing the baht to tumble to a two-month low of 35.88 during Wednesday’s trading.

Kanjana Chockpisansin, head of research at K-Research, suggested that these signs of resilience within the US manufacturing and service sectors could influence the Federal Reserve to maintain its high-interest rates for a longer period, given that inflation remains above the central bank’s target. She anticipates the earliest rate cuts to occur in the second quarter of this year.

However, the Thai economy’s outlook remains precarious, lacking the fundamental factors required to stimulate growth. Kanjana revealed that as of January 24, the Thai stock market had seen fund outflows totalling 23.9 billion baht (US$668 million) year-to-date, with foreign investors also selling Thai bonds worth 5.9 billion baht (US$165 million).

Kanjana also warned that should the US GDP and inflation figures released this week prove robust, the Thai baht could potentially fall below 36 to the US dollar. Despite this, SCB Financial Markets maintains that the baht has been fortified by a stronger yuan, as Beijing escalates its stimulus measures, with China’s central bank preparing to cut the reserve requirement ratio (RRR) for commercial banks, reported Bangkok Post.

Although the agency estimates the baht will continue to fluctuate within the range of 35.65-90, Kanjana believes that US factors will exert a more significant impact on the baht’s trajectory. She acknowledged that the market has anticipated the RRR measure and that the Chinese government has unequivocally stated its intent to stimulate the economy.

“Once the Chinese economy shows clear signs of a recovery, then the yuan and other currencies in the region should strengthen.”

In related news, the Thai Commerce Ministry boldly liberated ten service sectors in 2024, including telecom and currency exchange, fostering economic dynamism and growth.