Baht to trade 30.20 to the US$ by year-end: KBank

The bank said this would be because of capital inflows and a current-account surplus.

In addition, an expected rise in the policy rate should further strengthen the baht and help cool inflation in the short term, as the global economy is headed for stagflation.

Kobsidthi Silpachai, head of Capital Markets Research, said capital inflow should become evident this year, because the US Federal Reserve is likely to keep the Fed-fund rate at 2 per cent.

Moreover, the Kingdom will experience a current-account surplus, although its magnitude should be less than last year's levels.

The projection of the baht at 30.20 per dollar was made from a correlation between changes in the international reserves and the local currency's movements. KBank predicts the baht will strengthen 14-15 satang for each $1-billion (Bt31.9 billion) hike in foreign reserves. The reserves are expected to be more than $130 billion at the end of the year.

However, Kobsidthi said the baht would likely ease against the euro, because the eurozone's interest rate was on an upward trend, which could lure capital flows. The euro should continue to surge, because several central banks have sold off the dollar in their baskets of currencies in favour of the euro.

Bank of Thailand Governor Tarisa Watanagase warned both exporters and importers to be more cautious about foreign-exchange rates. She recommended they hedge their exposures. "The best way to survive the fluctuations is to strengthen our fiscal policies. Thai exporters earlier diversified their markets and currency income, which helped reduce risks," she said. Tarisa said despite political uncertainty, the local economy could grow further. The baht eased yesterday, ending five days of gains on speculation that high crude-oil prices may widen the nation's trade deficit and curb demand for the currency.

The baht lost ground as inflation and rising oil prices were expected to slow growth.

The Nation  yesterday reported the biggest trade deficit in 12 years as growth in imports outpaced exports.

"The deficit has put some pressure on the baht," said Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya. "We had relied too much on export growth."