US Dollar/Thai Baht FX Spot Rate

The baht opened today at 32.82 baht per dollar, weakening from yesterday's close of 32.76 baht per dollar, following the US PCE inflation index coming in higher than expected, supporting a Fed rate hike. The Financial Markets Group of Siam Commercial Bank assesses a trading range of 32.70 - 32.95 baht per dollar. Meanwhile, the Monetary Policy Committee unanimously voted to hold the policy rate at 1.00% per annum, and the parliament approved a 400 billion baht borrowing decree to address the energy crisis and restructure the country. Investors assign a 54.7% probability that the Fed will raise interest rates by at least 0.25% at its October meeting, after the headline PCE index rose 3.7%, higher than the forecast of 3.6%, while core PCE stood at 3.3% as expected. Investors are watching for a speech by Fed Chair Kevin Warsh at the Jackson Hole meeting on Friday for signals on the direction of rates, amid inflation above the 2% target and US government debt surging above 40 trillion dollars.

SCB Financial Markets assesses that the baht will move within a range of 32.70-32.95 baht per dollar today. The baht held steady after the MPC voted to keep the interest rate at 1.00%, but weakened overnight in line with the stronger US dollar index, following the core PCE inflation figures coming in at 0.2% month-on-month and 3.3% year-on-year, as expected by the market. Meanwhile, durable goods orders for July increased by 1.1%. Crude oil prices fell after reports that Iran and Oman reached a revenue-sharing agreement regarding the Strait of Hormuz, and the House of Representatives approved the 400 billion baht emergency loan decree with a vote of 285 to 141, to address the energy crisis and restructure the country.

Brown Brothers Harriman's Elias Haddad expects the Bank of Thailand to hold rates at 1.00%, leaving negative real yields that keep the Thai Baht lagging. The Bank of Korea is seen hiking again to 3.00%, supporting the South Korean Won as growth and inflation exceed targets.

HSBC expects the Bank of Thailand to keep its policy rate at 1.00% until at least 2027, even though the Thai economy expanded 1.9% in the second quarter of 2026, slightly above market expectations. HSBC had forecast 2.1% and Bloomberg 1.8%. On a seasonally adjusted basis, the economy contracted 0.2% from the previous quarter. Data centre investment, government stimulus measures, and inventory accumulation were key factors supporting growth. HSBC expects the Thai economy to expand 2.2% for the whole of 2026, but growth remains concentrated in the digital and data centre sectors as well as electronics exports, which rely heavily on imported parts and capital goods. This is reflected in the current account deficit in the second quarter, which reached as high as 12% of GDP, the weakest level since 2005, meaning growth has not yet spread broadly to households and SMEs. HSBC sees the economic outlook for 2027 as still weak, forecasting GDP growth of only 1.7% next year as the boost from fiscal measures is likely to fade, while households and SMEs continue to face tight credit conditions. Meanwhile, the widening current account deficit could put pressure on the baht.

Supavud Saicheua, chairman of the National Economic and Social Development Council, warned that Thailand's current account deficit will remove room for interest rate cuts by the Bank of Thailand, and pointed to bubble risks from investment in artificial intelligence technology. He said GDP in the second quarter of 2026 expanded 1.9 percent, down from the first quarter, while imports grew 24 percent, higher than export growth of 12 percent. This led the council to revise its current account forecast from a surplus to a deficit, a sign that the economy is overspending. Combined with high oil prices and inflation, the Bank of Thailand does not have enough supporting factors to ease monetary policy, and a deficit without offsetting capital inflows could make the baht volatile and weaken it. Meanwhile, capital inflows from foreign direct investment in AI industries such as data centers and printed circuit boards can remain a driver for about another year and a half, but there are early signs of investment exceeding demand and circular financing patterns that could lead to a bubble in the technology industry if returns from AI do not justify the investment. For second-half risks, Supavud said trade negotiations with the United States, which accounts for 25 percent of total exports or 14 percent of GDP, are the most worrying issue. If exports are affected, it will pressure the government to introduce support measures, leading to a wider budget deficit and a risk of a credit rating downgrade. Public debt including obligations under Section 28 could push the debt-to-GDP ratio close to or above 70 percent under the fiscal discipline framework, so stimulus projects such as Thai Chuay Thai must be handled carefully. Other impacts should also be considered, such as data centers consuming enormous amounts of electricity, which could force Thailand to import more natural gas and raise electricity prices, as well as relatively low employment compared with the investment amount.

Dr. Supavud Saicheua, Chairman of the National Economic and Social Development Council, warned that Thailand's economy grew only 1.9% in the second quarter, with exports up 12.5% but imports surging 24%, putting Thailand on course for a current account deficit this year. That could make it harder for the Bank of Thailand to cut interest rates and add pressure for the baht to weaken. The central bank has also cut its GDP forecast for next year to 1.8% from 2.1%. Thailand remains exposed to imported energy costs: if Brent crude averages 80 dollars per barrel, energy import costs would equal 10% of GDP, and if prices stay above 88 dollars per barrel, GDP could fall by as much as 3%. Structurally, Thailand's population is set to shrink to 64 million by 2040, with the working-age labour force losing 4.7 million people. The World Bank estimates this will drag down GDP and per capita income by 0.86% per year. Although Thai commercial banks have a BIS ratio as high as 20.7% and an NPL coverage ratio as high as 173%, SME lending has contracted for 14 consecutive quarters because of high non-performing loans. Thailand needs to shift toward food processing and services, as well as technology supply chains such as hard disk drives, PCB, OSAT and photonics. This September, Thailand will hold trade talks with the United States aimed at an Agreement on Reciprocal Trade, and will negotiate a free trade agreement with the European Union, but still faces the risk of additional US tariffs over forced labour and overcapacity issues. The US economy itself has interest costs as high as 3.3% of GDP and is on track to issue government bonds worth nearly 100% of GDP amid declining foreign buying, which will push bond yields higher around the world. Markets are also starting to worry about financial fragility from overinvestment and the technology sector's reliance on funding itself. If AI investment exceeds 3 to 4 trillion dollars while most companies have not yet restructured to generate worthwhile revenue, that could lead to the risk of a broader economic crisis.

Foreign analysts expect the recent strength in the Thai baht may be only temporary, because the Bank of Thailand is likely to keep monetary policy accommodative to support an economy hit by surging oil prices, in contrast to the U.S. Federal Reserve, which is expected to raise interest rates. Although the baht has strengthened 0.9% since the start of this month and is the second-best performing currency in Southeast Asia, analysts at BNP Paribas expect the baht to weaken to 33.50 per dollar by the end of the year, while MUFG Bank expects the baht to weaken about 4% to 34.40 per dollar in the fourth quarter of 2026, as higher oil prices pressure Thai exports. Thailand posted a trade deficit of 2.67 billion dollars and its current account swung to a deficit of 17.7 billion dollars last quarter, from a surplus of 1.4 billion dollars in the previous quarter. Senior Bank of Thailand officials have signaled there is no need yet to raise interest rates to support economic growth, even as inflation pressure builds from higher crude oil prices. Rising energy costs are adding broad pressure on the Thai economy, with surging jet fuel prices and conflict in the Middle East hurting the tourism sector, a key driver of growth, while the government plans to raise 12 billion dollars through new borrowing for stimulus measures and energy transition projects, raising concerns about whether Thailand can keep public debt within its 70% of GDP ceiling. An MUFG foreign-exchange strategist in Singapore expects the Bank of Thailand to keep its policy rate at 1% at its August 26 meeting to support growth, but that stance will pressure the baht because U.S. bond yields remain elevated and Thailand is expected to keep running trade deficits in coming months due to higher oil prices. Thailand's policy rate remains the lowest among emerging Asian economies, even as Indonesia and the Philippines have tightened monetary policy to curb inflation and support their currencies. A BNP Paribas strategist for emerging Asia rates and foreign exchange said there is a growing chance the baht will weaken against the dollar in the second half of this year, because the interest-rate differential between Thailand and the U.S. may widen, with the Fed expected to raise rates three times in a row starting in December, which would erode the seasonal support the baht usually gets from year-end tourism.

SCB WEALTH assesses that the US Federal Reserve is likely to keep interest rates elevated for an extended period and recommends that investors increase their allocation to US dollar assets to diversify risk and capture returns from global markets. Ms. Kesaree Ayuttaka, Head of Investment Research at SCB CIO, said that although the Fed did not raise rates at its latest meeting, it remains primarily focused on controlling inflation, while core inflation is still above the 2% target and the US economy continued to expand strongly in the first half of 2026. SCB CIO recommends overweighting high-quality short- to medium-term US government bonds and investment-grade corporate bonds, while avoiding long-term debt instruments affected by higher term premiums. Mr. Vachirawat Banchuen, Senior Financial Market Strategist at SCB Financial Markets, expects the baht to move in a range of 33.30 to 33.80 baht per US dollar in the near term, and investors can use periods when the baht weakens beyond 33 baht per US dollar to gradually accumulate US dollars for long-term overseas investment. Ms. Suparat Areewong, Executive Director of SCB Asset Management, said the US dollar remains a key global investment currency, and holding US dollar assets increases access to global investment opportunities while diversifying risk from relying solely on the Thai economy. Mr. Jaranapong Ratanasopa, Head of Investment Product Specialist at InnovestX, recommends three overseas investment themes: AI and semiconductor stocks through ETFs, foreign bond funds, and US dollar money market funds for investors who want to park cash and wait for investment opportunities.

Kasikorn Research Center, or KResearch, estimates the baht will move today in a range of 33.00 to 33.30 baht per dollar. This morning the baht weakened to around 33.18 to 33.20 baht per dollar, compared with yesterday's close of 33.14 baht per dollar. The depreciation is in line with profit-taking in the gold market after global gold prices failed to hold above 4,400 dollars per ounce, while most Asian currencies weakened amid tensions in the Middle East, especially concerns over the Strait of Hormuz after Iran signalled it would control shipping. However, the baht's weakness may be limited because US producer price data slowed in line with consumer prices, easing pressure on the Federal Reserve to accelerate rate hikes. US producer prices rose 4.7 percent in July from a year earlier, below the market forecast of 4.9 percent and down from 5.5 percent in June.

OCBC analysts Sim Moh Siong and Christopher Wong reported that the Philippine Peso, Indian Rupee, Indonesian Rupiah, and Thai Baht weakened as a rebound in oil prices renewed pressure on net-importing economies.

Thailand's producer price index in July 2026 expanded 7.3 percent compared to the same period last year, reaching 113.8, supported by high global energy prices and the depreciation of the baht. The mining products category rose 21.8 percent, agricultural and fishery products rose 8.0 percent, and industrial products rose 6.9 percent. Nantaphong Jiralertphong, director of the Trade Policy and Strategy Office under the Ministry of Commerce, said the trend for August is likely to remain stable or edge slightly higher, driven by energy prices and the weak baht. However, the impact of US import tariffs and the economic slowdown in destination countries may pressure manufacturers to absorb higher costs without adjusting product prices in the coming period.

The Bank of Thailand will wait for the second-quarter GDP figures from the National Economic and Social Development Council on August 17 before deciding whether to revise its 2026 economic forecast at the Monetary Policy Committee meeting on August 26. Assistant Governor and Bank of Thailand spokesperson Chayawadee Chai-anant stated that the committee currently projects GDP growth of 2.3 percent this year and sees supporting factors for the second-half economic trend from government measures and tourism. As for the US Section 301 tariff at a rate of 12.5 percent, it has not had a significant impact compared to some countries that received 10 percent, but excess production capacity to be announced by the US within August must be monitored. Chayawadee commented on the inflation direction in 2026, noting that the figure may be slightly lower than the previous forecast of 2.8 percent, while indicating that the current situation may be more supply-driven than inflationary, and caution is needed regarding Middle East uncertainties. The baht's appreciation has mainly stemmed from external factors, with the Bank of Thailand monitoring and managing to prevent excessive volatility.

The Bank of Thailand is monitoring the possibility that the United States may announce tariff hikes on goods linked to excess capacity within August. The assistant governor for corporate relations said Thailand currently faces a 12.5 percent US import tariff on goods related to forced labor, and could face additional levies if classified under excess capacity. Assistant Governor Chayawadee Chai-anant said the Thai economy in the second half of the year still has support from government measures and tourism, but full-year inflation may come in slightly below earlier forecasts. She also warned to watch the situation in the Strait of Hormuz and baht volatility.

Siam Commercial Bank has unveiled its investment strategy for the second half of the year, highlighting US equities and emerging markets, while keeping an eye on the baht potentially weakening past 34 baht per US dollar if the Middle East conflict severely impacts global oil supply. A senior financial strategist noted that the baht has weakened more than expected due to external and domestic factors. The external factor stems from the Middle East situation pushing global crude oil prices past 100 US dollars per barrel, while the domestic factor comes from the trend of Thailand's policy interest rate remaining low and possibly held through year-end, leading to increased use of the baht as a funding currency in carry trades. SCB Financial Markets assesses the baht's range over the next one to two months at 33.50 to 34.00 baht per US dollar. However, if global oil supply drops by 8 to 10 million barrels per day, oil prices could rise to 110 to 120 US dollars per barrel and pressure the baht past 34. On the investment strategy front, SCB Chief Investment Office recommends a core-opportunistic portfolio allocation, focusing on short- to medium-term US debt instruments and investment grade, while avoiding long-term debt instruments. For equities, it maintains a positive view on the US stock market with an active barbell strategy, emphasizing quality growth stocks and emerging Asian equity markets benefiting from the AI supply chain, such as South Korea. Although short-term volatility may arise from South Korean authorities' tightened measures on single-stock leveraged ETFs, it is expected to be positive in the long run. It also recommends holding gold in the portfolio for long-term diversification.

Standard Chartered Bank Thailand has raised its forecast for Thailand's GDP growth in 2026 to 1.6%, up from 1.4%, after the economy expanded better than expected in early 2026 and received support from government cost-of-living relief measures. Despite the upgrade, the bank assesses that the economy will face greater challenges in the second half of the year from an uneven recovery in foreign tourist arrivals, weak domestic demand, and external uncertainties. Foreign tourist arrivals since the start of the year have fallen 3% from the same period last year, and the average hotel occupancy rate stands at 69.0%. Headline inflation is expected to average 1.9% in 2026 and 1.5% in 2027, while core inflation remains low, leading the Bank of Thailand to likely hold its policy rate at 1.00% through the end of 2027. For the baht, Standard Chartered expects it to be at 32.50 per US dollar at end-2026, 33.50 at end-2027, and 34.50 at end-2028, amid pressure from still-weak fundamentals and uncertainty in tourism revenue.