"The US dollar has bottomed out," Tim Condon from ING Wholesale Banking/Financial Markets in Singapore said yesterday.
He predicts the dollar will appreciČate against the euro and the yen, while the baht could fall further, depending on confidence.
ING said the baht was expected to fall to 34.15 to the dollar in the third quarter before appreciating to 33.85 in the fourth quarter. ING predicts the baht will rise to 33 to the dollar next year, but Satian Tantanasarit, executive vice president of TMB Bank, predicts the baht will appreciate to 35 to the dolČlar this year.
"I agree the dollar has been weakČening and is bottoming out," he said.
However, Condon believes the US Federal Reserve will likely cut its polČicy rate 50 basis points during next year's first quarter after the worst of the inflation shock passes, while the European Central Bank in the same quarter will reverse its recent rateincrease policy.
Condon believes the fading of the oilprice shock will shift the European Central Bank's focus from inflation to growth. The US Fed funds rate is now at 2 per cent.
However, Satian believes the US central bank will maintain its rate and predicts the Bank of Thailand BOT will increase rates at least once more this year. The BOT's Monetary Policy Committee will meet again on August 27 for a ratemovement decision.
The baht fell for a second day yesČterday on speculation that slowing ecoČnomic growth and a deepening US housing slump would deter investČments in emergingmarket assets.
The currency extended this month's losses after the BOT yesterday cut its economicgrowth forecast for this year to as little as 4.8 per cent, saying highČer prices were squeezing consumption.
The Morgan Stanley Capital International AsiaPacific Index dropped as much as 2.3 per cent folČlowing a slump on Wall Street amid concerns about widening creditmarČket losses.
"The Thai stock market is down a lot, with foreign investors continuing to sell and thus damping demand for baht," said Chutima Nuphan, a curČrency trader at TMB Bank in Bangkok.
"Last night, we saw steep drops on Wall Street. The baht is going to be on the weak side."
The baht declined 0.1 per cent to 33.49 to the dollar late yesterday morning. It has been the secondworst performer in the past three months among the 10 most active Asian curČrencies outside of Japan.
The BOT raised its inflation foreČcast for this year to 7.58.8 per cent, Assistant Governor Duangmanee Vongpradhip said yesterday. In April, it forecast an inflation rate of 45 per cent. The US$206billion (Bt6.91 trilČlion) economy was previously forecast to expand as much as 6 per cent this year. Global funds sold about $1 billion worth of Thai stocks more than they bought from July 125. The Stock Exchange of Thailand Index fell as much as 1.7 per cent yesterday.