The USD/THB broke out the ascending triangle at the end of April, after the Bank of Thailand announced measures to encourage more capital outflows including raising purchases of foreign currencies for deposit by Thai citizens, from U.S. $500,000 to U.S. $5 million, and raising the value of properties that a Thai citizen can purchase abroad, from U.S. $10 million to U.S. $50 million per year. 

Since then, the Thai baht has depreciated about 9% against the U.S. dollar and the Thailand SET index has nosedived around 10%, as foreign investors are exiting the Thai stock market. The year-to-date foreign investors’ net sells top 92.5 billion baht, up about 2400% from the same period last year. 

From our technical viewpoint, a long-term ascending triangle chart pattern has now emerged and the projected target for the USD/THB is between 37.0 and 37.5 baht per dollar. 

Several factors could affect the Thai baht. For one, the Federal Reserve could delay its rate hike, as the U.S. non-farm payrolls report for August was disappointing. According to the latest poll by Reuters, 10 of 17 primary dealers, or the banks that directly deal with the Federal Reserve, now say they expect the Federal Reserve to raise rates in the fourth quarter of 2015 or later.

Second, the People’s Bank of China (PBoC) is selling the U.S. dollar to decelerate the capital outflows resulting from the renminbi devaluation. On Monday, the PBoC said its foreign-currency reserves fell a record U.S. $93.9 billion in August, the month when it intensely intervened in the currency market to prop up the yuan. 

A third factor is the economic outlook for Thailand in the second half of the year. The Thai government just approved a 136 billion baht stimulus package, or about 1% of the Thai GDP in 2014. Capital outflows could accelerate if the outcome of the stimulus package is below market expectations. According to the University of the Thai Chamber of Commerce, the stimulus is expected to boost economic growth by 0.7-1.0 percentage point this year.