The unstoppable wave of capital inflow pushed the baht to its strongest level in two years yesterday, while analysts expected further appreciation to Bt31.7 to the US dollar this month and at Bt31 by year-end.
Yesterday, the baht appreciated 0.4 per cent to Bt31.72 per dollar as of 3.35pm in Bangkok, the biggest advance since May 18 and the strongest level since May 2008, according to data compiled by Bloomberg.
Analysts attributed the appreciation to capital inflow, as investors shifted their funds from the United States and Europe, which are reeling under bad news. Thai exporters, however, are also converting to the US dollar to prevent further baht appreciation.
Over two days, the baht gained 20 satang against the dollar, without much intervention from the Bank of Thailand, according to analysts. They expect the baht to move in the range of Bt31.65-Bt31.80 today thanks to huge gains over the past few days, as well as importers buying dollars to fulfil their purchase obligations due late this month.
Thiti Tantikulanan, head of Kasikornbank's Capital Markets Business Division, said the baht had moved in line with regional currencies. Thanks to the inflows in the past two weeks, the baht has gained 1.5 per cent, the Singapore dollar 0.7 per cent, the Malaysian ringgit 1.1 per cent, the Philippine peso 1.2 per cent and the South Korean won 1 per cent.
He acknowledged that the baht's appreciation was slightly beyond that of other regional currencies, based on the inflow of about Bt6 billion to Bt7 billion so far this month.
"With a trade surplus of nearly US$7 billion [Bt222 billion] in the first half, the baht may further strengthen, and it could hit Bt31 per dollar at this year's end," Thiti said.
Hideki Hayashi, a global economist at Mizuho Securities in Tokyo, said: "With anticipation of further declines in the dollar, local exporters will rush to sell them, boosting the baht.
"Some Asian countries may boost interest rates while the US is expected to keep them low, which is supportive of regional currencies," he told Bloomberg.
The one-year swap rate yesterday rose to 1.72 per cent from 1.705 per cent on the previous day. The rate has increased 34 basis points since the end of June, as investors expected the Bank of Thailand to raise the policy rate.