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Tuesday, September 26, 2023

The Kasikorn Bank of Thailand expects the Thai Baht to weaken in the next 2 months


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The Kasikornbank expects the baht to bottom out in the next two months, largely dependent on the US Federal Reserve’s rate hike. She also expects the Bank of Thailand to raise interest rates twice this year.

The KBank, as the bank is usually called by the expats, assumes that the Monetary Policy Committee, the MPC will raise its key interest rate by a few points during its meeting in August.

Following a meeting in September, the central bank will hold interest rates to monitor economic prospects, especially inflation and the exchange rate, the KBank spokesman said.

According to the KBank, the MPC is expected to raise interest rates again by 25 basis points at its last meeting this year in November.

At the MPC meeting in June, the group voted 4-3 to keep interest rates at 0.5%, where they have been since May 2020. The three members who voted to raise interest rates aimed for a 0.25 percentage point increase.

Many research institutes expect Thailand to start a cycle of rate hikes in the second half of this year in response to continued high inflation.

Kobsidthi Silpachai, chief of the market and economic research at KBank, said two rate hikes totalling 50 basis points this year could be enough to contain inflation and control the exchange rate.

However, the development of the baht mainly depends on how much the Fed will raise interest rates, he said. The KBank expects the Fed to raise its key rate by 200 basis points this year.

Aggressive Fed rate hikes would strengthen the US dollar against other currencies, including the baht, Kobsidthi said.

Under this scenario, the baht would continue to depreciate over the next two months and could bottom out at 36 points against the dollar.

Thailand’s central bank will have to steer the local currency in line with the other currencies in the region, Khun Kobsidthi said.

An improving tourism sector in the second half of this year will continue to support a firmer baht against the dollar, according to the KBank, which will reach 33.5 against the dollar by the end of this year.

In the first four months of this year, the number of foreign tourists rose to about 800,000, and the bank expects that number to reach 4 million later this year.

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