Bangkok: The Financial Markets Group of Siam Commercial Bank (SCB Financial Markets: SCB FM) anticipates that the baht is likely to continue strengthening as the dollar index weakens. However, factors such as Thai political developments and potential US import tariffs may impact this trend. The Monetary Policy Committee (MPC) is expected to cut interest rates twice more this year.

According to Thai News Agency, Mr. Patrick Poulia, Senior Executive Vice President at SCB, noted that the baht has experienced volatility recently, primarily due to domestic political issues. Despite this, the baht has been strengthening due to foreign factors weakening the dollar. A recent Constitutional Court decision affecting the Prime Minister's duties contributed to a temporary weakening of the baht. Poulia suggests that ongoing political uncertainty and possible US import tax increases could further weaken the baht. He predicts a range of 32.50-33.00 baht per US dollar, with potential US tariffs on Thailand possibly exceeding 20%.

The medium to long-term outlook suggests a continued strengthening of the baht, driven by a weaker US dollar cycle. Capital inflows into Europe and Asia could further bolster the baht, which is expected to range between 31.50-32.50 baht per US dollar by year-end.

Mr. Wachirawat Banchuen, Senior Financial Market Strategist at SCB, shared that the market expects the MPC to reduce the policy interest rate twice more this year. This view is influenced by a pessimistic outlook on the Thai economy following domestic political challenges. The MPC may lower the interest rate to 1.50% in the third quarter and further to 1.25% by year-end. Additionally, the yield on 2-year Thai government bonds is expected to decrease in line with interest rate cuts, while long-term bond yields may decrease less due to global yield premiums. The conclusion of the Israel-Iran conflict has also reduced global inflation risks and crude oil prices, subsequently decreasing upside risks to the policy interest rate and Thai government bond yields.