Global Inflows During China Reopening Put Baht in a Sweet Spot

The outlook for the Thai baht is looking a lot brighter thanks to surging foreign inflows and supportive technical indicators.

(Bloomberg) — The outlook for the Thai baht is looking a lot brighter thanks to surging foreign inflows and supportive technical indicators.

The currency is likely to get a boost from expectations of higher tourist arrivals following China’s reopening and an earlier peak in the mainland’s Covid wave likely around Lunar New Year, Morgan Stanley strategists including Min Dai and Gek Teng Khoo wrote in a note on Monday. The baht has been Asia’s best performer this month, strengthening 3.4% against the dollar.

A further positive for the Thai currency is the fact the dollar-baht pair recently formed a so-called death cross, where the 50-day moving average drops below the 200-day gauge. That is taken as a sign of further declines. The pair has also fallen below support at the 76.4% Fibonacci retracement level of its rally from February to October 2022.

Global funds have poured $1.5 billion into Thai bonds in the first nine days of January, the largest inflows in Asia, amid optimism China’s reopening will mean more mainland travelers visiting Thailand. Tourism contributed around 20% of Thai gross domestic product before the pandemic.

The baht has also been buoyed by bets that cooling wage pressures in the US will prompt the Federal Reserve to slow the pace of its interest-rate hikes. Morgan Stanley maintained its short dollar-baht recommendation, and lowered the target level for the trade to 32. The pair was at 33.456 on Tuesday.

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