Kasikornbank (KBank) has revised upward its year-end forecast for the baht to 35.50 against the US dollar from the prior 36.20, citing a wave of offshore fund inflows in the wake of Brexit.
Britain's vote to leave the EU and the prospects of a delayed US Federal Reserve rate hike have intensified capital flows fleeing to emerging markets from developed countries, said Kobsit Silpachai, head of capital markets and research at KBank.
Offshore fund inflows have strengthened the baht and other currencies in emerging countries, he said.
In the aftermath of Brexit, the International Monetary Fund (IMF) revised down its GDP growth projections for developed countries and the world for 2016 and 2017. The forecast for advanced economies was slashed by 0.1 percentage points to 1.8% this year and by 0.2 percentage points to 1.8% the next.
The IMF also cut its global GDP growth forecasts by 0.1 percentage points for each year, to 3.1% in 2016 and 3.4% in 2017.
But the fund has kept its growth projection for emerging markets unchanged at 4.1% this year and 4.6% for 2017. It has also maintained the economic growth forecast of Asean-5 (Asean excluding Cambodia, Laos, Cambodia and Vietnam) at 4.8% this year and 5.2% the next.
The baht fell slightly to 34.76 versus the dollar yesterday from Wednesday's 34.74, according to Reuters data. The local currency rose by 3.6% against the greenback year-to-date.
South Korea's won is the best performer in Asia, advancing 4% year-to-date, thanks largely to the massive capital inflows. But such fund flows are expected to be moved to other regional markets for short-term investment and this will strengthen other Asian currencies.
"Even though the baht is expected to be stronger versus the dollar in the short term, it is not a one-way upward trend," Mr Kobsit said.
In addition, the Yes vote on the draft charter will pave the way for next year's general election and this will temper foreign investors' concerns, he said.
Paiboon Nalinthrangkurn, president of the Investment Analysts Association, waxed bullish about emerging stock markets' outlook for the next two years.
Emerging markets' early stage growth cycle and China's recovery could attract capital inflows and this would be a boon to emerging markets, said Mr Paiboon, who is also chief executive of Tisco Securities.