THE Thai baht, set to become the worst-performing currency in emerging Asia this quarter, does not look like it is going to bottom anytime soon, according to Mizuho Bank Ltd.
Foreign funds have pulled a net US$3.8 billion from the nation’s equity market since the end of March, the most since at least 1999 on a quarterly basis, amid concerns that an escalation in trade frictions between the US and China will weigh on Thailand’s current account surplus – a source of attraction for the country’s currency bulls.
The baht had been the second-best performer in emerging Asia in the first quarter, underscoring the spread of the rout in developing economies to countries with relatively strong fundamentals.
Central banks in emerging markets – from Argentina to Turkey – have gone on the defensive as a stronger US dollar and rising Treasury yields fuelled concern that a failure to tighten monetary policy risks a currency sell-off and an acceleration in inflation.
“The market’s focus has shifted to trade frictions, and the currencies of economies with high dependence to trade are becoming more vulnerable to sell-offs,” said Masakatsu Fukaya, an emerging market currency trader at Mizuho Bank.
“My view is that the dollar will remain strong for a while. People are becoming concerned that a trade war will lead to overall shrinkage in global trade, so that could potentially threaten Thailand’s current account surplus.”
The baht has weakened almost 6 per cent against the US dollar this quarter to trade at 33.10 as at 2.15 pm in Bangkok on Thursday.
Overseas investors withdrew net US$251 million from the bond market since the end of March, the first net quarterly outflows since the last three months of 2016, according to data from the Thai Bond Market Association. BLOOMBERG
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