SCB FM Sees Stronger Baht Following Temporary Ceasefire Agreement, Eyes Buying Opportunity in USDTHB
The Thai baht has temporarily strengthened after US ceasefire proposals reduced oil prices, but remains highly vulnerable to Middle East tensions with crude correlating 78% to currency moves. SCB sees a buying opportunity in US dollar-baht
SCB Financial Markets reports the Thai baht has temporarily rebounded following reports that the United States has submitted a ceasefire proposal to Iran, which has caused global crude oil prices to decline and weakened the US dollar index, supporting regional currencies including the baht. However, shipping through the Strait of Hormuz has not returned to normal, keeping crude oil supplies and related supply chains disrupted, with crude prices remaining volatile in response to war developments and spreading news.
The correlation between crude oil prices and baht value has significantly increased since the Iran conflict began—rising from approximately 25% before the war to 78% after, and exceeding 90% during periods of escalation. The baht has weakened more than other regional currencies during oil price increases due to Thailand's deteriorating terms of trade, as the country imports energy at much higher prices while export index increases remain limited.
Patrick Poolia, Senior Executive Vice President and Head of Financial Markets at Siam Commercial Bank, notes that while domestic factors haven't significantly impacted the baht, Moody's recent upgrade of Thailand's credit outlook to stable didn't strengthen the currency due to ongoing war concerns and high oil prices. Despite recent Thai economic figures exceeding expectations across exports and accelerating inflation, the baht hasn't strengthened materially.
Looking ahead, if the war continues unresolved and the Strait of Hormuz remains closed, the baht is expected to weaken slightly, with projections of 32.50-33.00 baht per dollar over the next month. However, if the conflict ends within 1-2 months, the baht could strengthen rapidly by 0.50-1 baht as Middle Eastern crude supplies recover to 70-80% of normal levels, pushing Brent crude to 80-90 dollars per barrel and weakening the US dollar index.
