Thai Baht: Oil shock and dovish BoT keep THB pressured against US Dollar – OCBC

OCBC’s Sim Moh Siong and Christopher Wong note that the Thai Baht (THB) is trading near its weakest level in more than a year against the US Dollar (USD), as volatile oil prices, a firmer USD and higher US yields weigh on the currency. They highlight the Bank of Thailand’s (BoT) accommodative stance and tolerance for gradual weakness, but warn that sharper depreciation could test policymakers if oil remains elevated and imported inflation builds.

High energy costs and policy stance weigh

"THB stayed under pressure as rise in oil prices was compounded by firmer USD, higher US yields while BoT’s still-accommodative stance added to the drag."

"THB remained under pressure near 15-month low (vs. USD), with the renewed oil shock now compounded by a firmer USD and higher US yields."

"This remains a challenging backdrop for THB given its reliance on imported energy, while the resulting inflation concerns have also reinforced expectations that US rates may stay elevated for longer."

"The BoT’s accommodative stance also offers little support to the THB, while Governor Vitai has also earlier signalled no urgency to tighten."

"That said, a sharper depreciation may test policymakers’ threshold especially if oil stays elevated and imported inflation builds."