The baht weakened to below 36 to the dollar on Monday as renewed concerns surfaced over Thailand’s fiscal discipline, following the government’s announcement on its digital wallet scheme on Friday, leading to outflows from Thai bond and stock markets, according to analysts.
The Thai currency fell to a one-week low of 36.10 baht to the greenback Monday morning, from last week’s close of 35.95 baht, as other regional currencies also shrank against the dollar, said Kasikorn Research Center (K-Research).
The baht has been under pressure from continued fund outflows from both the bond and stock markets after the Srettha Thavisin government released details of the 10,000-baht digital handout late last week.
On Friday, foreign investors were net sellers of 3.75 billion baht in the Thai bond market, while they posted a net outflow of 2.39 billion baht from the Stock Exchange of Thailand, said K-Research.
“We expect the outflows to continue today, including in the bond market,” said Kanjana Chockpisansin, head of research at the think tank.
K-Research anticipates the Thai currency to trade in a range of 35.40-36.20 to the greenback this week, she said.
Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand), said fresh concerns about Thailand’s fiscal discipline were evident based on the sharp depreciation of the baht after Mr Srettha unveiled the government’s plan to seek parliament approval for a borrowing bill worth 500 billion baht to fund the digital wallet stimulus.
“Our current view is the proposed bill will be heavily scrutinised by the Council of State, the anti-corruption body and the Senate, and may not come to pass,” he said.
Poon Panichpibool, market strategist at Krungthai Bank (KTB), said concerns over Thailand’s fiscal stability and US interest rates are factors that could pressure the baht to weaken further, while foreign fund flows may fluctuate.
Fed chair Jerome Powell said late last week the central bank is leaving the door open for additional interest rate hikes to combat inflation.
KTB anticipates the baht could move in a range of 35.60-36.30 to the dollar this week, said Mr Poon.
“The financial markets will likely be volatile for the time being, driven by uncertainties surrounding Thailand’s monetary policies and fiscal stability worries, coupled with concerns over the Chinese economy and conflicts in the Middle East,” he said.