Thai Baht Plunges Record Low in Months against US Dollar

Thailand announced a fresh lockdown for additional two weeks from August 3-18 with the inclusion of 16 more provinces to the list of maximum control dark red zones. If cases do not level off the chances of further lockdown extension could be stretched until August 31, 2021. Additionally, the health ministry already signaled a new peak of infected cases may be months away.

Amid the country’s high dependence on the tourism industry and with no signs of recovery, the impact of lockdown is weighted adversely on the currency pair USD/THB which is trading at 32.955 as of this morning. The 10-year bond yield stayed at 1.56% with 2.58 billion baht flowed into the purchase of bonds on August 2 according to Thai BMA.

The Bank of Thailand (BoT) cut down the GDP estimate to 1.8% from 3% with concerns of another recession in the third quarter. Eyes on BoT’s policy rate announcement today with the market expecting the regulator to hold the rate at 0.5%. However, THB is expected to depreciate further if the policy rate is slashed which would directly benefit exports. On Thursday, the announcement of headline and core inflation in July is expected to be +1.3% YoY and +0.5%YoY which might push USD/THB upward.

 

According to Kasikorn Securities KCE, EPG, TU and CBG are direct beneficiaries and are expected to outperform. In 2020, it is important to note revenue from foreign countries of these companies accounted for over 50%.