The baht is projected to fall to 34.50 against the US dollar by the end of the year and to 35.50 in 2025, influenced by upcoming US government policies affecting the yuan, according to the Kasikorn Research Center (K-Research).
Early Thursday trading saw the Thai currency drop to a three-month low of 34.61 against the dollar, down from 34.20 at Wednesday’s close, driven by a strengthening dollar and US bond yields after the Federal Reserve cut interest rates by 25 basis points overnight.
The Monetary Policy Committee of the Bank of Thailand opted to keep its policy rates steady at 2.25% on Wednesday.
Kanjana Chockpisansin, head of research, banking, and financial sector at the think tank, remarked, “Even though the Fed cut rates to a two-year low of 4.25-4.50%, as the market expected, a hawkish statement from the central bank and its upgrade of the US’s 2025 economic growth forecast lifted sentiment for the dollar, making Asian currencies, including the baht, weaken against the greenback.”
Fed officials now foresee just two rate cuts next year, a reduction from the four expected in September. Ms. Kanjana noted that the Thai market is also anticipating two rate cuts in 2025.
“Trends now support dollar strengthening, pressuring the baht to continue depreciating against the US currency,” she stated, confirming that K-Research predicts the Thai exchange rate will be 34.50 baht to the dollar by the end of 2024.
The Thai currency has seen a 1.2% decline since the start of the year, moving from 34.14 baht to the dollar at the end of 2023.
During the same period, the Chinese yuan and Japanese yen fell by 2.7% and 9.3%, respectively, while the South Korean won saw the most significant drop at 11%. Conversely, the Malaysian ringgit was the sole Asian currency to appreciate against the dollar, rising by 2%.
Ms. Kanjana anticipates that the yuan will depreciate due to a slowing economy in mainland China. Chinese officials are also contemplating a weaker yuan in 2025 in response to expected higher US trade tariffs with Donald Trump’s return to the White House.
She added that K-Research forecasts the baht will be influenced by movements in the yuan, predicting a year-end exchange rate of 35.50 to the dollar in 2025.
Asian stocks, including those in Thailand, declined following the Fed’s forecast of fewer rate cuts next year. The yen breached the significant 155 mark against the dollar as the Bank of Japan kept its borrowing costs unchanged at its recent meeting.
Gold prices approached US$2,600 an ounce, while Bitcoin remained stable above $100,000.
Pipat Luengnaruemitchai, an emerging Asia economist at BofA Securities, expects the Bank of Thailand to implement three 25bps rate cuts in 2025, starting in the second quarter, bringing the policy rate back to levels seen from 2015 to 2018.
He maintains that the current monetary policy is overly stringent, given the inflation rate. He suggests that rate reductions could soften financial conditions amid contracting loan growth, deteriorating asset quality, and weakening domestic demand.
