USD/THB likely to trade around 36.00 by end-2016

The Bank of Thailand has kept its key interest rate on hold since the first half of 2015. It had cut its rate by 50 basis points back then. There is certain chance that the central bank might lower the rate by 25bp by the end of 2016 given the decelerating inflation and the downside risks to the economic growth, said Commerzbank in a research note. Meanwhile, the central bank is seen favouring a weaker THB to help keep loose monetary conditions and to underpin exports.

In 2015 the Thai baht was the third worst performing current in Asia. It had depreciated almost 9 percent against the USD and was just behind Indonesian rupiah and Malaysian ringgit, which had fallen 10 percent and 19 percent respectively.

The Thai baht is being mainly weighed down by the stronger USD backdrop, the central bank’s preference for a weaker THB, decelerating growth momentum, and persistent political uncertainty given that the authorities have pushed back the time table for a return to civilian rule to second half of 2017 from originally February 2016, stated Commerzbank. These factors are likely to persist and continue to weigh on THB in the future.

“We forecast USD/THB at 36.00 by end-2016 on the assumption of a continued strong USD”, added Commerzbank.