Bank of Ayudhya’s Outlook on the Baht: A Range of 32.75-33.50 Baht/Dollar Expected

The Bank of Ayudhya (BAY) has assessed the baht’s movement for the current week, predicting a range of 32.75-33.50 baht/dollar, influenced by gold prices.

The baht is expected to fluctuate within this range, having closed stronger at 33.03 baht/dollar after trading between 33.02-33.52 baht/dollar last week. This marks the baht’s strongest level in 19 months. The dollar’s weakness against major currencies, except the yen and Swiss franc, was triggered by the Federal Reserve’s decision to cut interest rates by 50bp to 4.75-5.00%.

Despite the rate cut, the Fed chairman expressed confidence that inflation will slow to its target, with no immediate signs of the US economy heading into recession. The Bank of Japan (BOJ) maintained interest rates at 0.25%, signaling no rush to raise interest rates yet. Foreign investors purchased Thai stocks and bonds, resulting in a net amount of 5,865 million baht and 9,975 million baht, respectively.

Market Outlook for the Week

Krungsri Global Markets Group stated that investors will closely follow comments from Fed officials and US PCE inflation in August to assess the direction of US policy interest rates. The Fed’s latest estimates suggest a potential interest rate cut of 50bp to 4.25-4.50% later this year, followed by 100bp in 2025 and another 50bp in 2026, reaching 2.75-3.00%.

The market expects the Fed interest rate to reach 2.85% at the end of 2025, which is a year faster than the Fed’s dot plot. This could lead to a recovery in the dollar if economic data exceeds expectations. Additionally, the price of gold in the world market is expected to continue influencing the baht’s value.

Domestic Economic Factors

The Governor of the Bank of Thailand emphasized that Thailand does not need to reduce policy interest rates in line with the United States, as domestic economic factors will be the primary consideration. The general picture from different aspects remains consistent with the BoT’s assessment. However, credit quality is at greater risk due to an uneven recovery across economic sectors.

The strengthening baht may also impact the business sector’s profits. Considering these factors, the Monetary Policy Committee (MPC) is likely to maintain the policy rate at 2.50% in its next meeting on 16 October.