USD/THB likely to end Q3 at 33.4, Q4 at 33.6: says Scotiabank

The THB has appreciated 7.6 percent year-to-date amid large portfolio inflows, the best performing currency in the region. Foreign investors have poured USD 73mn and USD 6.36bn of funds in local equity and bond markets respectively this year to chase higher returns. However, an excessively strong THB is not in local regulators’ interest.

The THB’s outperformance has spurred concern as it could hurt the export-hub’s competitiveness. The central bank has reduced the weekly supply of 3M and 6M short-dated bonds to THB 30bn each since April to discourage fund inflows.

Thailand’s CPI inflation rebounded in July as we expected earlier, rising to 0.17 percent y/y from -0.05 percent y/y the previous month. On July 5, the central bank said in a statement that "Thailand’s growth outlook improved further due to a better export outlook while domestic demand continued to expand at a gradual pace and not yet sufficiently broad-based."

The BoT raised its GDP growth forecast for 2017 to 3.5 percent in June monetary policy report from the previous estimate of 3.4 percent. Meanwhile, the central bank revised its 2017 expectations for headline inflation lower to 0.8 percent from 1.2 percent.

"Given the nation’s elevated current account surplus, the THB could continue to outperform regional peers with USD/THB consolidating at around the 33.25 level for now. Our forecast of USD/THB for the end of Q3 and Q4 is 33.4 and 33.6 respectively," Scotiabank commented in its latest research report.

Meanwhile, FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest