Thai Baht: Weakness against US dollar deepens as trade deficit weighs – MUFG

MUFG sees an upward bias in USD/THB while oil remains elevated, with the Bank of Thailand expected to hold its policy rate at 1.00% to support growth. For MUFG’s Lloyd Chan, the Thai Baht is a key expression of Asia’s oil shock. He points to September trade figures showing a sharp widening of the deficit as surging imports outstripped robust export growth.

How Do the Trade Deficit and Policy Support the Baht?

"Within Asia FX, THB remains one of our preferred expressions of the oil shock. Thailand’s September trade numbers reinforce this view."

"The trade deficit widened sharply to USD5.86bn from USD2.48bn in August. Imports surged 50.4%yoy, considerably faster than the still-strong 24.0% expansion in exports."

"Electronics and AI-related global demand remain important supports for shipments, but higher energy costs and strong demand for imported electronic components have simultaneously pushed up the import bill."

"We remain cautious on THB and expect the Bank of Thailand to keep its policy rate at 1.00% on 28 October to support growth. In our view, this leaves USD/THB biased higher while the oil shock persists"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)