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 rallied so quickly in recent weeks on optimism about tourism growth in the country that it has already hit analysts’ year-end targets.
To follow the euro/baht exchange rate, see: Thai baht THB rate
In addition to the upward forecast of tourist arrivals, this increase is also due to the reduction in the current account deficit due to the drop in oil prices.
This rise means that the baht has already reached the level of 35.2 forecast for the fourth quarter by analysts surveyed by Bloomberg.
These rapid gains are also fueling debate over whether the dollar has peaked, with analysts beginning to wonder when the time is right to return to emerging markets, which saw capital outflows as the US embarked on aggressive rate hikes. .
See: How the US rate hike is affecting the baht and Thailand’s economy
“We expect the Thai baht to rise further, although we are cautious about investing at current levels given the sharp rise in recent weeks,” said Mitul Kotecha, head of emerging markets strategy at TD Securities in Singapore.
The currency’s rally was fueled by a weaker dollar, a policy change by Thailand’s central bank, signs of a recovery in tourism and firmer economic data, it added.
The baht’s movements on Monday (Aug 15) highlighted its vulnerability to global economic uncertainties.
The currency fell 0.5% on the day, the biggest drop in more than three weeks, after China cut key interest rates and a report showed economic growth was weak, lower than economists had estimated. .
Thailand’s gross domestic product rose 2.5% between April and 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 6.1 million expected in April.
See: Thailand targets 10 million tourists in 2022, tourist tax filed
The number of visitors is 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 about a fifth of the country’s economy before the pandemic.
The government’s decision this month to place covid-19 in the same category as influenza is another positive factor, as it suggests the country’s public health outlook is stabilizing.
See: Thailand will move Covid-19 to the same disease category as the flu
Meanwhile, the Bank of Thailand’s (BOT) first rate hike in over three years last week failed to provide a strong boost to the baht as policymakers signaled their futures moves will be gradual as the Fed US Federal continues its sharp rate hikes.
See: Bank of Thailand raises policy rate to control high inflation
The currency actually fell after the policy decision before ending the day slightly stronger.
The Overseas China Banking Corporation. warns of a drop in the dollar and baht “as the rapid pace of recovery is yet to be confirmed, and the BOT lags behind in terms of policy tightening,” according to Frances Cheung, rate strategist at the bank in Singapore.
However, positive signs such as better economic data have led some analysts to forecast a bit more room for the baht to rise after recent gains.
Strategists at Malayan Banking Bhd, including Saktiandi Supaat, forecast the baht to hit 34.80 per 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 crossing 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 uptick in tourism, lower oil prices and lower freight costs.
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