Thailand: Baht reverses losses to claim title as emerging Asia haven

The baht is emerging as an unlikely haven in developing Asia as optimism about the nation’s tourism sector buoys inflows.

The region’s worst-performing currency in 2021 has vaulted to the top of the rankings this year on bets that a quarantine-free visa programme will kick-start the travel industry. That’s limiting the fallout from geopolitical risks and expectations for aggressive US rate hikes.

The baht’s strength is in marked contrast to the losses recorded by most of its regional peers this year, and should allay the central bank’s fears of excessive volatility which could hurt growth. Thai stocks and bonds have reeled in $6.2 billion in 2022, exceeding the amount pumped into other emerging Asian economies.

“There is talk that the baht is a bit of a safe haven,” said Kobsidthi Silpachai, head of capital market research at Kasikornbank Plc in Bangkok.  “Thailand is a net creditor country for over 10 years now,” meaning it has more foreign-exchange reserves than external debt, he said.

The currency has climbed about 3% versus the greenback this year to beat all its regional peers. It rose to 32.303 per dollar on Tuesday, the strongest since September, after breaching the 32.50 psychological level the previous day.

Kasikornbank’s Kobsidthi says the baht could climb to 32.24 before the week is out. The median forecast in a Bloomberg survey of analysts is for the currency to advance to 32.1 by year-end.

The government expects between 200,000 and 300,000 travellers to take advantage of its quarantine-free visa program for the fully vaccinated in February alone, with the numbers expected to swell in the following months. About a fifth of gross domestic product was derived from tourism-related activities before the pandemic.