The baht extended losses on Friday after the country's central bank said inflation was under control and that future rate hikes would be strictly data-driven, bucking a firmer trend among regional currencies.
The baht fell 0.4% after Bank of Thailand (BoT) governor Sethaput Suthiwartnarueput said inflation would peak in the third quarter before returning to the target range next year.
He ruled out the need for a special rate meeting, following off-cycle policy tightening moves by counterparts in the Philippines and Singapore last week, adding that rate hikes would be gradual, as he remained confident that the Thai economy would return to pre-pandemic levels in the first quarter of 2023.
The Monetary Policy Committee is expected to raise its key interest rate from a record low of 0.50% at its next meeting on Aug 10.
The Thai and Indonesian central banks are the only emerging Asian central banks that have not raised rates recently.
"The central bank is going the wrong way. They say they are ahead of the curve but that is not true because they have continued to maintain record low rates in the face of surging inflation," said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
"I expect BoT to hike rates moderately in August and November. But I don't expect them to resort to a hawkish stance overnight," he added.
Most currencies in the region edged higher even as the US dollar perked up alongside US Treasury yields.
Both had fallen overnight after data showed a slump in factory activity and a rise in claims for unemployment benefits, implying that the economy is already feeling the effects of aggressive Federal Reserve tightening, potentially giving the central bank less to do in future.
The Malaysian ringgit, Indonesian rupiah and Indian rupee rose 0.1% each. The Philippines peso also edged higher.
Equities in Asia's emerging markets rose for a third straight session and were set to post weekly gains, as they continued to ride high on strong earnings results from growth stocks in the US Singapore stocks rose 0.7% on Friday, to their highest level since June 10 and were also up 2.4% this week.
The SET index rose 6.47 points or 0.42% to 1,552.47 after the morning session.
Stocks in Malaysia and Indonesia gained 2.7% and 3.4%, respectively, for the week. Wall Street indexes continued their ascent overnight with results from Tesla and Netflix driving outperformance in the growth sector.
"Corporate earnings have provided a mixed picture overall, but subdued factory activity in the US and an uptick in jobless claims there also point towards further moderation in economic activities, but markets have been shrugging off these growth worries for now," said Jun Rong Yeap, market strategist at IG.
US equity futures were, however, lower in Asia on Friday following a downbeat outlook from Snap.
