PUBLISHED: 7 Aug 2024 at 07:02
The baht is projected to encounter increased volatility and a weaker performance this week due to uncertainties in the US dollar’s strength and the forthcoming decisions from the Federal Reserve regarding monetary policy.
The Bank of Ayudhya (Krungsri) anticipates that the baht will fluctuate between 35 and 35.75 baht per dollar throughout the week.
Key influencing factors for the baht’s trajectory include the dollar’s depreciation and fluctuations, driven by recent updates to US economic data and the Fed’s policy outlook.
On Tuesday, the baht opened at 35.51 per dollar, a decline from Monday’s closing rate of 35.26, reflecting the latest US economic indicators.
On Monday, the baht saw a notable appreciation against the dollar, buoyed by the dollar’s weakening after reports indicated rising inflation and unemployment rates in July, which sparked fears of a possible recession in the US economy.
The market is currently estimating a 70% chance that the Federal Reserve will implement a rate cut in September, as reported by Krungsri Global Markets.
Despite external uncertainties, the baht demonstrated its strongest rate against the dollar in five months last week, stabilizing within the 35.34-35.70 baht per dollar range.
Krungthai Global Markets predicts that the baht will remain volatile, potentially slipping to a range of 35.50-35.65 this week, while SCB Financial Markets forecasts movement within a 35.35-35.55 range.
Additionally, Amonthep Chawla, chief economist at a leading bank, forecasts that the Federal Reserve may reduce its policy rate three times this year—in September, November, and December—with substantial cuts of 0.5 percentage points each time to rein in inflation.
These expected changes could significantly influence global capital flows, impacting Thailand’s capital and money markets. The same bank maintains its view that the Bank of Thailand’s Monetary Policy Committee will likely lower the policy rate by 0.25 percentage points in December, reducing it from 2.5% to 2.25%.
While the US economy has not yet shown signs of a recession, it remains a point of close scrutiny.
A recession in the US could adversely affect Thailand’s manufacturing and exports, posing risks to the broader economy. “If a recession occurs and impacts Thailand’s manufacturing and exports, we may need to revise the Thai GDP growth forecast for this year downward from the current expectation of 2.3%,” he stated.
