BANGKOK: The baht has strengthened again, breaking below 31 baht per US dollar and marking its strongest level in a week, after Donald Trump’s global 15% tariff move weighed on the US dollar.
Kasikornbank and Krungthai Bank said the baht could continue to strengthen on capital inflows, the export outlook and a surge of investment flowing into Thailand.
The latest movement in the exchange rate showed the baht strengthening and breaking below 31 per dollar on Feb 23, supported by two key factors: a sharp rise in gold prices amid geopolitical uncertainty, and a weaker US dollar.
At the same time, foreign capital has continued to flow into Thai assets, reflecting buying pressure across the region.
Dr Kanjana Chokpaisalsilp, a research executive at Kasikorn Research Centre Co Ltd, said the baht’s move below 31 per dollar has been driven mainly by two factors: a recovery in gold prices and the dollar’s direction.
On gold, she said prices rebounded due to geopolitical uncertainty, particularly the conflict between the United States and Iran, which pushed gold prices sharply higher, breaking above key resistance levels beyond US$5,000 to US$5,100 an ounce.
She said the sharp rise in gold prices has directly resulted in the baht strengthening as well.
She said another factor that markets have refocused on is the dollar, following the Supreme Court’s interpretation of Trump’s powers. This has created continued uncertainty, leading markets to see potential negative effects on the US economy, causing the dollar to weaken.
Looking at the baht’s appreciation, she said it has strengthened continuously since Friday at around 31.19 per dollar, then moved to test support at 31.
The strongest level observed was around 30.96 to 30.98 per dollar, the firmest in a week.
Comparing currencies in the region, she said the baht was the third-strongest at 1.7%, behind the ringgit at 4.4% and the peso at 2.2%.
For the baht’s direction ahead, she said the currency could strengthen further if economic uncertainty becomes clearer, prompting markets to view that the Fed may need to cut rates more than twice.
This scenario, she said, has not yet been priced into the dollar’s current direction.
She estimated the short-term baht range at 30.70 to 31.60 per dollar.
She added that the baht’s volatility has increased over nearly the past two months.
Compared with last year’s volatility of about 7.1%, volatility from the start of this year to the present has risen to 7.6%, reflecting more severe swings up and down than before. Sanguan Jungsakul, an executive in Krungthai Bank’s treasury markets business, said the baht has moved below 31 per dollar again, driven mainly by external factors, especially the strength in gold prices, which have risen sharply.
“The dollar index has weakened and issues including US-Iran tensions have helped safe-haven assets such as gold outperform, which has become a factor pushing the baht stronger,” he said.
US economic policy is increasingly being questioned and facing more challenges, meaning Trump’s ability to use sweeping powers has diminished, according to Sanguan.
Markets may, therefore, see that some policies, such as setting very high import tariffs, may not be implemented as fully as in the past, which could affect long-term confidence in the dollar.
At the same time, he said domestic factors have clearly carried more weight on the baht this year. Thailand’s exports have not been as bad as many had worried, and the country still holds a trade surplus.
He also cited supporting factors from foreign direct investment, particularly in data centres backed by the board of investment, which is positive for the economy and the baht. — The Nation/ANN
