Thai Baht: Trade deficit fuels weakness against US dollar – MUFG

Lloyd Chan at MUFG focuses on Thai Baht as a key expression of the Oil shock in Asia. He cites September trade data showing a sharply wider deficit, driven by surging imports outpacing strong exports. MUFG expects the Bank of Thailand to keep its policy rate at 1.00% to support growth, leaving USD/THB biased higher while Oil remains elevated.

Trade deficit and policy support 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.)