Technical indicators show that the currency is overbought, and the Thai baht may be nearing an end without new catalysts, such as a return of Chinese tourists.
The baht has risen 6% against the dollar in the past month, and was the second best performing currency in Asia as China loosened Covid curbs and investors bet that the Federal Reserve will slow its rate hikes. Data due this week shows that Thailand's economy increased by 4.4% in the September quarter, the fastest growth in four years.
Slow stochastics, a momentum indicator, said that the currency's gains have taken it into overbought territory from oversold just about two months ago. The resistance at its 200 day moving average and around its August high of 35.057 is poised to slow its advance.
Unless there is scope for more USD selling and more global risk on appetite, or more China reopening news, or more sequentially good news, it may consolidate around here, said Galvin Chia, EM FX strategist at Natwest Markets in Singapore. The recent technical range around 35.12 and 36.40 looks sensible. The baht was helped by increasing expectations for the Fed to cut rates next year, but this tailwind may have run its course, with several members of the US central bank still sounding hawkish. The St. Louis Fed President James Bullard said on Thursday that policymakers should raise interest rates to at least 5% to 5.25%, leading to a selloff in markets.
The Bank of Thailand's position that it will stick to a slow tightening path won't help the cause of the baht. If the currency is going to push higher, it needs new stimulus. While China has indicated that there is a relaxation of some Covid-Zero rules, officials and state media have pushed back on optimism of a rapid reopening.
Before the pandemic, tourism made up about a fifth of Thailand's economy, with Chinese tourists accounting for about 28% of the visitors. The median estimate of analysts surveyed by Bloomberg for the baht is 37 for the fourth quarter. It was closing at 35.8 on Friday.
The Chinese tourists and the lower oil prices are missing for a larger rally in the baht, according to Rajeev De Mello, a global macro portfolio manager at GAMA Asset Management. In small steps, China's outbound tourism will be opened slowly. Thailand would be one of the biggest beneficiaries of Chinese tourists being allowed to travel. Here are the key Asian economic data to be released this week:
None Meta Confronts an Apple-Sized Hole in Its Once-Mighty Advertising Business