Lloyd Chan at MUFG argues that the Thai baht (THB)’s weakness despite low oil prices reflects its low yield profile and the Bank of Thailand’s (BOT) growth-focused stance, which limits the scope for tightening. Rising United States (US) yields have turned Thai portfolio inflows into net outflows, adding to depreciation pressure and making the baht underperform against other regional currencies against the US dollar (USD).
The baht is weighed by yields and outflows.
“For the Thai baht, recent weakness despite low oil prices highlights an easing of terms-of-trade pressures.”
“Instead, the baht is now being undervalued due to its low yield profile and the Bank of Thailand’s growth-focused policy stance, which limits the scope for monetary policy tightening.”
“Despite easing pressure from low oil prices, strengthening depreciation pressures and explaining the baht’s poor performance, rising US yields have triggered a shift towards net foreign portfolio outflows from Thailand ($379 million net foreign outflows in June vs $680 million net inflows in May).”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
