Baht Could Strengthen Beyond 33 to the Dollar as Analysts Anticipate Stable Policy Rate from Bank of Thailand
PUBLISHED: 15 Oct 2024 at 20:09
The baht may appreciate beyond 33 to the dollar, rising from 33.40 as of Tuesday, if the Bank of Thailand maintains its policy interest rate at 2.50% during its upcoming meeting, according to insights from economists. Predictions indicate the Thai currency could fluctuate between 32.90 and 33.70 to the dollar this week.
The baht was quoted at 33.25/27 on Tuesday morning, lower than Friday’s close of 33.34, but slid to around 33.40 by midday. This movement comes as the dollar remains strong near a two-month high amid investor caution ahead of significant monetary policy announcements scheduled for this week.
The recent volatility in regional currencies has been attributed to market disappointment regarding China’s economic stimulus package revealed over the weekend. The dollar’s strength is also supported by expectations that the Federal Reserve may implement fewer interest rate cuts than initially anticipated, with solid economic data from the U.S.
Market expectations suggest the Fed will reduce the federal funds rate by no more than 25 basis points at its upcoming meetings, in contrast to prior forecasts of a 50 basis point cut. In Thailand, the central bank’s Monetary Policy Committee is projected to maintain the policy rate at a decade-high of 2.50% in its Wednesday meeting.
If the interest rates remain unchanged, increased foreign investment is expected to drive the baht to potentially reach 32.90 against the dollar, marking the last time the baht traded above 33 on October 2. Current forecasts suggest the Thai currency could end the year between 33 and 34 to the dollar, a significant improvement from earlier estimates.
Financial analysts express optimism regarding the baht’s potential for strengthening, particularly if the central bank leaves the benchmark rate intact. It is anticipated that the MPC’s statement will reflect confidence in the current rate as supportive of economic growth.
Exporters have voiced the need for the central bank to enhance efforts in stabilizing the baht, citing challenges in managing cash flow due to its recent volatility. Adjustments in the baht’s value, in line with regional currencies, are viewed as understandable by the private sector.
