Thailand’s currency, the Baht, jumped 2.3% to around 35.45 to the dollar this month, putting it well ahead of gains in Asia.
The Thai baht has rebounded so quickly in recent weeks on optimism regarding the country’s tourism growth that it has already hit analysts’ end-of-year targets.
To follow the euro/baht rate, see: Course of the Thai Baht THB
In addition to the upward forecast for tourist arrivals, this increase is also due to the reduction in the current account deficit due to the fall in oil prices.
This rise means that the baht has already reached the level of 35.2 forecast for the fourth quarter by analysts polled by Bloomberg.
These rapid gains are also fueling debate over whether the dollar has peaked, with analysts beginning to question when is the right time to return to emerging markets, which saw capital outflows as the U.S. embarked on aggressive rate hikes.
See : How rising US rates are affecting the baht and Thailand’s economy
“We expect the Thai baht to rise further, although we are cautious regarding investing at current levels given the strong rise in recent weeks,” said Mitul Kotecha, head of strategy for emerging markets at TD Securities in Singapore.
The currency’s rebound was driven by a weaker dollar, policy change from Thailand’s central bank, signs of tourism recovery and firmer economic data, he added.
The baht’s movements on Monday (August 15) highlighted its vulnerability to global economic uncertainties.
The currency fell 0.5% during the day, the biggest drop in more than three weeks, following China cut its key interest rates and a report showed economic growth was weak. lower than what economists had estimated.
Thailand’s gross domestic product rose 2.5% in April-June from a year earlier, below the median estimate of a 3.1% expansion according to a Bloomberg survey.
In July, Prime Minister Prayut Chan-o-cha said the nation expected to attract 10 million international tourists this year, up from the 6.1 million forecast in April.
See : Thailand targets 10 million tourists in 2022, tourist tax shelved
Visitor numbers are expected to reach 30 million next year, less than the 40 million people who visited the country the year before the spread of Covid.
This rebound is significant for Thailand, given that the travel sector accounted for regarding a fifth of the country’s economy before the pandemic.
The government’s decision this month to put Covid-19 in the same category as influenza is another positive, as it suggests the country’s public health outlook is stabilizing.
See : Thailand to move Covid-19 to same disease category as flu
Meanwhile, the Bank of Thailand’s (BOT) first rate hike in more than three years last week failed to provide a strong boost to the baht as policymakers signaled that their futures Measures will be gradual, as the US Federal Reserve continues its steep rate hikes.
See : Bank of Thailand raises policy rate to rein in high inflation
The currency actually fell following the policy decision before ending the day a bit stronger.
The Oversea-Chinese Banking Corp. warns of a drop in the dollar and the baht “as the rapid pace of the recovery has yet to be confirmed, and the BOT lags behind in terms of policy tightening”, according to Frances Cheung, rates strategist at the bank in Singapore.
Nonetheless, positive signs such as better economic data have led some analysts to forecast a little more room for the baht’s rise following recent gains.
Malayan Banking Bhd strategists including Saktiandi Supaat forecast the baht to hit 34.80 to the dollar in the first quarter of 2023.
Scotiabank FX strategist Qi Gao expects the Thai currency to fluctuate in the 35-36 range, with the possibility of breaking through the lower figure in the future.
Goldman Sachs Group Inc maintains its bullish outlook on the baht and expects it to outperform non-Japanese Asian currencies in the second half of the year, strategist Kamakshya Trivedi wrote in a note dated Aug. 5.
He cited the rebound in tourism, lower oil prices and lower freight costs.
Source : Bloomberg
