Thai baht and Singapore dollar battle for strongest regional currency

China is reopening its borders, pushing economists to predict that an influx of Chinese tourists to Thailand will propel the Thai baht into Southeast Asia’s reigning currency in 2023. But the baht has one regional competitor: the trusty Singapore dollar.

Thailand’s economy heavily depends on tourism revenue. In 2019, Chinese tourists made up over 40% of the 40 million tourist arrivals in the kingdom.

Beijing’s strict zero-Covid policy kept Chinese tourists away from Thailand for three years, devastating the Thai economy, but things are finally changing.

If December inflation numbers reveal that the Consumer Price Index (CPI) is rising as economists predict, the baht could get a nice head start in the race to be the region’s strongest currency.

The Bank of Thailand expects to keep hiking interest rates in the next six months. All currencies in the region are expected to appreciate against the US dollar amid decelerated interest rate hikes from the US Federal Reserve.

The Singaporean dollar was the only currency to appreciate against the US dollar last year, making it a strong competitor in the region. The Singaporean dollar benefited from money-tightening policies.

Singapore is also expected to benefit from China’s reopening, but it is the predicted downfall of several other major regional currencies that makes it a real rival of the Thai baht.

Economists do not have high hopes for Indonesia’s rupiah, the Philippine peso and Malaysia’s ringgit this year.

Indonesia’s rupiah is set to depreciate amid suspicions that the island nation’s central bank’s rate increases are drawing to a close.

Economists predict the Philippine peso to have its worst year since 2013 this year due to a trade deficit and a growing national debt pile.

The Malaysian ringgit is appreciating against the greenback this week thanks to the Fed’s relaxed interest hikes, but a dismal outlook for commodity prices leads economists to believe it will not be a leading Southeast Asian currency this year.