Baht stages sharp rebound to outperform Asian currencies

SINGAPORE: After lagging other Asian currencies for most of the year, Thailand’s baht has staged a sharp rebound to outperform its peers.

The baht has rallied almost 1.5% in May after dropping over 7% in the first four months of 2020.

The catalyst? Traders are betting Thailand’s tourism-dependent economy will recover swiftly from the virus-induced slump as economies begin to reopen.

“The sooner availability of a vaccine will mean a quicker recovery in industries such as retail and tourism, and as such currencies relying more on these sectors may respond more,” said Frances Cheung, Singapore-based head of Asia macro strategy at Westpac Banking Corp.

Yanxi Tan, a foreign exchange strategist at Malayan Banking Bhd expects the baht to rise to 31.7 per dollar by year-end as the pandemic dissipates.

The currency rallied as much as 0.5% to 31.872 per dollar Tuesday, with sentiment bolstered by signs of progress in developing a vaccine against the virus.

Still, the baht’s rebound may be curtailed after the government warned the economy could contract as much as 6% this year due to the outbreak.

The central bank is expected to lower the policy rate by 25 basis points to 0.50% at a review Wednesday, according to a Bloomberg survey.

Analysts say a relaxation of curbs will boost confidence. Thailand has allowed shopping malls to resume business as part of a phased rollback of its lockdown, even as it remains in a state of emergency through May.

“Thailand has done well to contain the coronavirus outbreak, with the country gradually reopening businesses and easing restrictions,” says Chang Wei Liang, a macro strategist at DBS Bank Ltd in Singapore.

“This has given investors confidence that tourism could recover over time, in turn supporting the baht.”