Thai baht expected to weaken against US dollar

The Thai baht is expected to weaken to an estimated 37.20 baht against the US dollar later this week, due to the continued Middle East tensions, says Kasikorn Research Centre (K-Research). The economic indicators from the US, due for release this week, are also predicted to bolster the dollar’s strength.

Monday morning trading saw the Thai currency quoted at 36.97 baht to the greenback, the lowest in half a year. This was followed by a minor rally to 36.94-96 baht, in comparison to Friday’s close of 36.86 baht. The weakened state of the baht is attributed to the global gold price drop and the fluctuations of the Chinese yuan and Japanese yen.

The US dollar, viewed as the most secure currency, has seen an increase in strength due to the persisting Middle East crisis and the possibility that the Federal Reserve will not be hasty to lower interest rates, given the robust performance of the US economy.

The ongoing Middle East conflict and a robust dollar have had a significant impact on the baht, which has depreciated 7.6% year to date, stated Kanjana Chockpisansin, the head of research in the banking and financial sector at K-Research.

The baht’s weakness is second only to the yen in the region, which has seen an 8.8% drop year to date. The South Korean won has also depreciated by 6.4% this year, as per K-Research’s data.

The market’s expectations for rate cuts in the US and other developed economies have been scaled back due to comments from Fed officials and higher-than-expected inflation data last week. The US is scheduled to announce first-quarter GDP figures on Thursday and the core Personal Consumption Expenditure price index, known for tracking inflation, on Friday, said Kanjana.

“If the US economic indicators exceed the market’s expectations, they increase the chance that the Fed would keep the rates higher for longer. This would result in a stronger dollar and put further pressure on the baht to depreciate.

“K-Research, in line with the views of Kasikornbank, maintains that the US central bank would decrease rates at least twice this year.”

Kanjana noted that K-Research anticipates the baht to fluctuate between 36.70 to 37.20 baht to the dollar this week, based on the expectation that geopolitical concerns are unlikely to dissipate quickly, reported Bangkok Post.