MUFG analyst Lloyd Chan highlights that, despite softer US inflation data weakening the Dollar and reducing expectations for further Federal Reserve rate hikes, the USD/THB exchange rate has broken above the 33.50 level, signaling continued weakness for the Thai Baht [1]. Chan points out that Thailand's low carry profile remains a significant headwind for the Baht, making it less attractive to investors compared to other currencies [1].
Additionally, the recent rebound in oil prices is expected to worsen Thailand's terms of trade, further pressuring the Baht [1]. Growth risks for Thailand have also increased due to the re-escalation of Middle East tensions, which could prompt the Bank of Thailand to maintain an accommodative monetary policy stance to support the domestic economy [1].
Valuation metrics from MUFG suggest that the Baht remains modestly overvalued, reinforcing the outlook for further weakness against the US Dollar [1]. No specific market reactions or analyst forecasts beyond MUFG's outlook are provided in the source article [1].
CONCLUSION
MUFG's analysis points to continued weakness for the Thai Baht against the US Dollar, driven by overvaluation, unfavorable terms of trade, and increased growth risks. The outlook remains negative for the Baht, with no immediate signs of reversal indicated in the source.