Chinese travelers can help the baht emerge from its political quagmire 2023

The prolonged deadlock drove the baht to 35.285 per dollar on Friday, its lowest level since March 1.

The currency has fallen 3.5% since the referendum, the worst-performing Asian emerging currency behind the Malaysian ringgit.

Landing slots

Possible assistance. In May, the tourists and Sports Ministry stated airlines are in negotiations with the local airport authorities to enhance landing slots, which should boost tourists from China and Australia.

Chua Han Teng, an economist at DBS Group Holdings Ltd in Singapore, wrote in a client note last week that Chinese tourist arrivals were only 40% of pre-pandemic levels in April. As flight capacity increases, this should improve.

May current-account statistics on Friday may show early signs of the surge. Exports fell in April, allowing for an upside surprise.

Some drawbacks

Baht bears see several causes for more losses.

Given the strong link between the two currencies, the baht may suffer from Chinese yuan weakness, said Societe Generale Singapore Branch Asia macro strategist Vijay Kannan. He warned that weakening foreign demand and a weak Chinese rebound might hurt Thai exports.

US-Thailand monetary policy divergence may potentially weaken the baht. The Federal Reserve has signaled two more interest-rate rises this year, while experts are very convinced the Bank of Thailand’s main rate has peaked at 2%.

Near success

If the political gridlock breaks, those drawbacks may not matter.

Parliament meets July 3 to establish a new administration and pick a prime minister. Last week, Move Forward, an eight-party coalition of pro-democracy parties led by Harvard-educated Pita Limjaroenrat, announced it was close to forming a government with Senate backing.

Kannan of Societe Generale said USD/THB might fall if political issues are resolved.

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