Asia’s Best Currency Is Driven by Tourists Pouring Into Thailand

By Jaehyun Eom, Bloomberg

Thailand’s baht rebounded so rapidly in the past few weeks on optimism about the country’s tourism-led growth that it’s already hit year-end analyst targets.

The currency jumped 2.3% to about 35.45 per dollar this month, leading gains in Asia by a wide margin. In addition to rising forecasts for tourists arrivals, the advance is also being driven by a narrowing current-account deficit due to falling oil prices.

The surge means the baht has already touched the 35.2 level forecast for the fourth quarter by analysts surveyed by Bloomberg. The rapid gains also feed into the debate over whether the dollar has peaked, as analysts start to weigh in on the right time to return to emerging markets, which had seen capital outflows as the US embarked on aggressive rate hikes.

“We expect more upside for the Thai baht though we are cautious about jumping in at current levels given the sharp rally over past weeks,” said Mitul Kotecha, head of emerging market strategy at TD Securities in Singapore. The currency’s rebound was driven by a combination of dollar weakness, the Thai central bank’s policy shift, signs of a recovery in tourism and firmer economic data, he said.

Moves in the baht on Monday highlighted how it’s still vulnerable to global economic uncertainties. The currency declined 0.5% during the day, the biggest drop in more than three weeks after China cut key interest rates and after a report showed economic growth was weaker than economists had estimated.

Thailand’s gross domestic product rose 2.5% in April-June from a year earlier, below the median estimate for a 3.1% expansion in a Bloomberg survey.

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