Thai baht heads for poorest January since 2020

The Thai baht, after experiencing a nearly 4% loss compared to the US dollar, is on track for its poorest January performance since 2020. The currency’s downfall signals further challenges ahead, given the significant outflows.

Emerging Asia’s top-performing currency in the fourth quarter turned into this year’s biggest loser as global funds avoid Thai assets. This comes amid a dispute between the government and the central bank concerning the means of reviving the struggling economy.

Julapun Amornvivat, the Deputy Finance Minister, voiced concerns last week about the 10-year high borrowing costs hindering economic recovery. This followed the Bank of Thailand’s resistance to calls for a rate cut, arguing that reducing borrowing costs would not address the economy’s structural issues.

Alvin Tan, the head of Asia FX strategy at RBC Capital Markets in Singapore, predicted that the baht would continue to suffer due to the increasing political backlash against its current policy rates. He anticipates the dollar-baht to fluctuate between 36.0 and 36.50 in the following weeks after it closed at 35.63 last week.

Foreign investors have already pulled out US$808 million in net equity this year. The benchmark stock index sank to a three-year low last week due to concerns over growth. Recent bond defaults and a significant accounting scandal have shaken investors, resulting in the Thai debt market becoming unattractive as well.

Wednesday’s data will reveal whether the nation’s current account improved in December following a deficit of US$1.24 billion in November. In an attempt to boost tourism, officials have since lifted visa requirements for Chinese travellers visiting the country.

Nicholas Chia, a macro strategist at Standard Chartered Bank SG, stated that while the recovery in tourism is positive for the baht, per capita tourist spending and the number of Chinese arrivals in 2023 are still below pre-pandemic levels.

Other potential obstacles for the baht include a weak Chinese economy and possible delays in the Federal Reserve’s rate cut. These factors continue to influence traders to adjust their expectations of a March move and to drive the greenback higher, reported Bangkok Post.