USD/THB: Weak macro to oddly support the baht – ANZ

The Thai baht has recorded a decline of 1.7% against the USD, month-to-date. Yet, economists at ANZ Bank believe the fundamentals point to currency strengthening in the coming months, although some temporary downside risks remain.

Key quotes

“As odd as it may sound, Thailand’s slow economic recovery will continue to support the baht. A prolonged lack of foreign tourist arrivals will likely cap the recovery in household incomes, expenditures and imports. However, Thai exports could benefit from an improving global trade pulse. High gold prices should continue to support the baht, at least in the near-term, since the BoT’s revamped rules for gold trading to prevent bouts of currency strength are expected only by the year-end.”

“On the downside, the risk of political uncertainty has returned as protests have surged, but have thankfully remained peaceful so far. The Finance Minister’s recent resignation just after 26 days in office contributed to the baht’s losses, given investor concerns regarding the void in economic leadership at the helm.” 

“We believe that fundamentals will support further currency strength, outweighing the temporary downside risks. However, increased volatility in the near-term cannot be ruled out. We expect USD/THB to reach 30.9 by end-2020.”