Goldman: Brighter Outlook Ahead On Tourism, Dip In Oil &Lower Freight Costs

Goldman Sachs note that “the Thai Baht has depreciated almost 7% against the USD YtD, and has underperformed several NJA currencies (on a spot basis), largely driven by divergent monetary policies between the U.S. Fed and the BoT. However, we expect the BOT to start normalizing policy with a 25bp hike at the 10th August MPC meeting followed by a 25bp hike at every meeting until the policy rate reaches 2.50%. The number of foreign tourists in H1 was above BoT’s expectation, notably in Q2, given the faster-than-expected relaxation of travel restrictions globally. We think the BoT are likely to revise up their tourism forecast this year from 6mn currently, as the Governor has already commented that it could reach 8mn vs. our forecast of 10mn. If tourism arrivals come in below target, we think this will more likely be a function of airline capacity than demand to travel. Meanwhile, oil prices have dipped below USD 100/bbl and global freight costs are easing, both of which are tailwinds for the THB. As such, we maintain our bullish THB outlook and expect the currency to outperform NJA FX in H222.”