Baht Continues To Outperform Despite On-going Political Uncertainty

USD/THB hit fresh lows of 33.76 in earlier trade. We now sit higher, back around 33.84/85. This is fresh lows in the pair back to mid May. Lows at that juncture were in 33.55/60 region. Beyond that lies the 33.40 region, levels seen in early February of this year and then the 33.00 figure level. Highs from yesterday were near 34.20, while at the start of the week the pair topped out around the 34.70 level.

• Broader USD weakness is helping the baht, although in the past week it has rallied over 2%, a clear outperformer, as market optimism grows we may be getting towards an end to the political impasse.
• Prospects for Pita to assume the PM role in Thailand appear all but extinguished at this stage, after the Thai parliament barred him from running for the position yesterday. The expectation is for Pheu Thai to now lead the formation of the next government, with former property tycoon Srettha Thavisin a potential PM candidate or Paetongtarn Shinawatra. The next round of PM voting will be held on July 27.
• Still, a Pheu Thai candidate could be fighting an uphill battle to secure enough votes in parliament. Alternatively, the party could initiate talks with some pro-military parties, but this would come at a reputational cost.
• The other complicating factor is parliament's decision to prohibit the re-nomination of candidates changes the rules of the game, as each candidate will now get only one shot at trying to secure enough votes, regardless of which side of the aisle they come from.
• Still this uncertainty doesn't appear to be impacting THB negatively. Yesterday saw +$451.9mn of offshore inflows to local bonds, although equity inflows were close to flat.