ANALYSTS expect the Thai baht to weaken from the middle of this year onwards after interest rate hike in both US and Thailand leads to Thai policy rate trailing US Federal fund rate, INN News reported today (Jan. 21).
Yuanta Securities Thailand analysts said in just the first 3 weeks of the new year the Thai baht appreciated by 1.90% reaching 31.90 to the dollar.
Significantly, this is the steepest rise in 4 years with the last big jump being in August 2014, nevertheless the Thai currency is moving in the same range as other regional currencies, they added.
Where the US dollar is concerned, this will either remain stable or weaken in the first quarter of this year, with a change only coming when the new US Federal Reserve chairperson, Jerome Powell, takes over from Janet Yellen in March.
It is only after that that the Fed will increase the Federal fund rate, with this likely happening for the first time this year in the second quarter, and the second time in the second half of the year, taking the key US rate to a range of 2.00-2.25% from 1.25-1.50% today.
However, Yuanta Securities’ analysts said the Thai policy rate will remain at 1.50% till the third quarter of 2018, before the Bank of Thailand considers hiking it by 0.25% to 1.75% in the fourth quarter.
While the Thai economy will likely grow by 4.3% this year, these analysts think the the widening of the key Thai and US rates will lead to the Thai currency weakening against the dollar from the middle of the year onwards.
Top: Some Thai baht notes. Photo: INN News