Post by : Shakul

Bangkok, Thailand — Siam Commercial Bank (SCB) has projected that the Thai baht will gradually depreciate against the US dollar throughout 2026, ending the year near 33 baht per dollar, as external currency pressures and domestic monetary policy shape market conditions.

SCB’s quarterly outlook anticipates the baht weakening from around 31.50 in the first quarter, to 31.70 in Q2, then 32.00 in Q3, and finally approximately 33.00 by year-end. This forecast reflects a balance between supportive domestic investor flows and persistent strength in the US dollar.

Domestic Factors Supporting the Outlook

On the home front, Thailand has recently experienced notable foreign capital inflows into both equity and bond markets, boosted by greater political clarity after the national elections. SCB noted net foreign investment gains in Thai stocks and bonds, which support investor sentiment even as the currency weakens.

At the same time, the Bank of Thailand (BOT) surprised markets by cutting its key policy interest rate by 25 basis points to 1.00%, a move designed to support the broader economic recovery and ease borrowing costs for households and businesses amid below-potential growth expectations for 2026 and 2027.

The rate adjustment — the sixth easing move since late 2024 — aimed to anchor inflation expectations and stimulate activity, particularly as private consumption and lending conditions remain soft.

External Pressures and Dollar Strength

Despite Thai policy easing, SCB highlighted that the US dollar is expected to stay firm, supported by ongoing expectations that the Federal Reserve will maintain relatively hawkish monetary settings compared to other major economies. This dynamic lends upward pressure on the dollar and limits sustained baht appreciation.

Market analysts also point to high global currency volatility and continued tariff uncertainties affecting global trade — factors that typically boost demand for the US dollar during periods of uncertainty.

Impact on Thai Businesses and Risk Management Trends

The stronger baht seen in recent years — appreciating more than 8% year-on-year in 2025 — has challenged Thai exporters by narrowing profit margins and increasing revenue pressure. SCB’s markets team reported rising foreign exchange hedging activity, with forward contracts and options now accounting for a majority of total forex trades, reflecting broader risk management efforts by companies.

In response to ongoing currency volatility, SCB has also expanded its digital and AI-driven forex tools, aiming to make risk management more accessible through online platforms. Digital transactions now represent about 40% of SCB’s forex dealings, and the bank aims to push this above 50% by the end of 2026.

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