Thai Baht Faces Potential Weakening Amid US Tariff Uncertainty, Says SCB FM

Analysts predict short-term volatility, long-term outlook hinges on global trade responses

 

The Thai baht is poised for potential short-term depreciation, according to SCB Financial Markets (SCB FM), as the impact of recently announced US tariffs creates market uncertainty. 

 

Analysts suggest that while the baht has weakened within expected parameters, long-term stability depends heavily on global trade responses and the overall health of the world economy.

 

Despite the US imposing higher-than-anticipated import tariffs, SCB FM reports that the baht has remained within projected trading ranges. In the immediate future, tariff-related pressures are not expected to cause significant further weakening.

 

Instead, the US is likely to utilise these tariffs as a negotiation tool with trade partners. Should Thailand reach a favourable agreement, market anxieties could subside, and pressure on the baht might ease.

 

However, other factors, such as dividend payouts from foreign companies to their parent entities, could exert downward pressure on the baht over the next one to two months. SCB FM forecasts the baht to fluctuate between 34.15 and 34.65 against the US dollar in the short term.
  



 

Looking ahead, the long-term outlook remains highly uncertain. If global trade partners refrain from aggressive retaliation, and the impact on the global and US economies is contained, the baht could potentially strengthen to around 32.50-33.50 by year-end. 

 

Conversely, a severe economic downturn triggered by the tariffs, leading to recession fears and a “risk-off” environment, could see the baht weaken to 34.00-35.00.

 

Wachirawat Banchuen, senior financial market strategist at SCB FM, highlighted the immediate market reaction to the US tariff announcement. The resulting surge in demand for safe-haven assets and a sell-off of riskier investments caused the baht to weaken sharply.

 

While it has since recovered slightly, the measures have also affected global financial markets, with US Treasury yields declining, gold prices reaching record highs, and the Japanese yen strengthening.
  



 

The US tariffs, calculated based on existing tariffs and non-tariff trade barriers, have placed Thailand in a particularly challenging position.

 

Despite a relatively small effective tariff rate differential, the US has cited other trade barriers, leading to a higher overall tariff. Thailand now faces a 36% import tariff, higher than many regional counterparts.

 

SCB FM believes that the baht's short-term fluctuations will largely depend on the outcome of trade negotiations between Thailand and the US. 

 

Potential concessions, such as reduced import tariffs on US goods and increased investment in the US, could lead to a reduction in the announced tariffs.

 

The bank advises businesses involved in import and export to consider hedging against exchange rate risks using FX forwards and to diversify risk by utilising more local currencies.

(2025/04/04-00:00)