Thai Baht Hit 3-Month Low on Global Downturn Fears and Rising Domestic Political Uncertainty

Thai baht dropped to a three-month low in early Asian trade on Monday on fears of a global economic downturn and rising domestic political uncertainty.

The baht depreciated against the dollar for the third consecutive week, falling to 34.89 on Monday from Friday’s closing price of 34.68, with a possible move toward February’s all-time low of 35.39. 

Analysts at Bank of Ayudhya (Krungsri Capital Securities) explained the Thai baht’s depreciation to last week’s stronger-than-anticipated U.S. economic data, which prompted markets to look for a further rate rise in June to combat elevated inflation.

Meanwhile, Bloomberg analysts cited political issues as a headwind for the baht. 

“Hurdles to the Move Forward party coalition are growing, increasing political uncertainty over who will form the next government which is weighing on the baht by spurring foreign funds to sell both the nation’s equities and bonds,” Bloomberg reported.

The Bank of Thailand’s interest rate decision is expected on May 31. The central bank governor said earlier this month that BOT will continue its steady and measured monetary tightening to combat inflation.

According to Galvin Chia, emerging markets FX analyst at Natwest Markets in Singapore, “I don’t think the Bank of Thailand’s decision will have much bearing on the baht, given that low policy rates relative to regional peers means that the carry consideration is negligible.”

As for the movement of the baht today, it is expected to be at 34.70-35.00/$US.