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Baht is Asia's top outperformer on tourism rebound bet

Baht is Asia’s top outperformer on tourism rebound bet

A man collects his umbrellas on an almost empty beach which usually crowed with tourists following the coronavirus disease outbreak in Pattaya on March 27, 2020. (Reuters photo)

After lagging other Asian currencies for most of the year, Thailand’s baht has staged a sharp rebound to outperform its peers.

The baht has rallied almost 1.5% in May after dropping over 7% in the first four months of 2020. The catalyst? Traders are betting Thailand’s tourism-dependent economy will recover swiftly from the virus-induced slump as economies begin to reopen.

“The sooner availability of a vaccine will mean a quicker recovery in industries such as retail and tourism, and as such currencies relying more on these sectors may respond more,” said Frances Cheung, Singapore-based head of Asia macro strategy at Westpac Banking Corp.

Yanxi Tan, a foreign exchange strategist at Malayan Banking Bhd. expects the baht to rise to 31.7 per dollar by year-end as the pandemic dissipates. The currency rallied as much as 0.5% to 31.872 per dollar on Tuesday, with sentiment bolstered by signs of progress in developing a vaccine against the virus.

Still, the baht’s rebound may be curtailed after the government warned the economy could contract as much as 6% this year due to the outbreak. The Bank of Thailand is expected to lower the policy rate by 25 basis points to 0.50% at a review Wednesday, according to a Bloomberg survey.

Analysts say a relaxation of curbs will boost confidence. Thailand has allowed shopping malls to resume business as part of a phased rollback of its lockdown, even as it remains in a state of emergency through May.

Thailand has done well to contain the coronavirus outbreak, with the country gradually reopening businesses and easing restrictions,” says Chang Wei Liang, a macro strategist at DBS Bank in Singapore. “This has given investors confidence that tourism could recover over time, in turn supporting the baht.”