Analysts expect baht to test 32 as US dollar weakens further
The baht could appreciate to test 32 to the US dollar or strengthen even further, as the greenback is set to weaken further amid mounting pressure on the Federal Reserve to cut the US interest rate at its September meeting, according to analysts.
Following the Bank of Thailand’s (BoT) policy rate cut of 25 basis points (bps), which would typically weaken the Thai currency, the baht moved in a range of 32.24-26 to the dollar in morning trade on Thursday, compared with Wednesday's close of 32.31 baht in offshore markets, according to Kasikorn Research Centre (K-Research).
Most Asian currencies jumped on Thursday, led by the Indonesian rupiah and Malaysian ringgit, as the US dollar slipped to multi-week lows.
“The baht and other regional currencies, along with the world’s major currencies, gained strength amid heavy selling of the dollar and a weakening US bond yield, both of which are pressured by the expectation that the Fed will cut rates at its September meeting,” said Kanjana Chockpisansin, head of the research, banking and financial sector at K-Research.
The market is putting the odds of a cut of 25 bps at the Fed's Sept 16-17 meeting at 99.9%, according to the CME FedWatch tool, following Tuesday’s release of inflation data, she said.
US Treasury Secretary Scott Bessent said there is a possibility the Fed could cut interest rates by as much as 0.50% at the September meeting, considering the weakening employment figures.
He also suggested the central bank’s benchmark ought to be at least 1.5 percentage points lower than it is now.
On Wednesday, the BoT highlighted the recent strength of the baht against regional currencies as an issue worth monitoring, as it affects the competitiveness of the country's export and tourism sectors.
The baht is projected to appreciate further for the rest of the year, to 31.5 against the greenback, said Kuala Lumpur-based Maybank Securities.
According to K-Research, the baht has appreciated 5.6% year-to-date, compared with a 7.5% gain for the yen and a 1.8% uptick for the yuan.
The Philippine peso and rupiah strengthened by 1.3% and 0.3%, respectively, while the ringgit gained 6.5%.
“We see a possibility the baht can hit a range of 32.00-32.10 to the dollar from now until the year-end,” said Ms Kanjana, adding that Kasikornbank is maintaining its projection for the baht of 33.7 to the dollar at the end of 2025.
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