Goldman Sachs Stays Positive On THB

The US bank stays constructive on THB and expect bond and swap curves to flatten further, see below for more details.

"In Thailand, the House Assembly will likely convene (again) on 22 August to vote for a Prime Minister (PM). If successful (in selecting a PM), then we think this will improve clarity on the political outlook, which should be positive for THB risk assets. The BoT has indicated that they are close to reaching the neutral rate (without elaborating where that is). We read the BoT as mildly hawkish, as they would like to build policy space. Our base case is that the BoT are done hiking rates (as inflation is very low), but we highlight that risks are skewed to the hawkish side. We expect the current account to flip back into surplus this year (after two years of deficits). Despite a few false dawns on the political outlook, we think the formation of a new government is drawing closer. As such, we remain bullish THB vs. NJA peers and maintain our 12M USD/THB forecast of 32.0. Given the monetary policy backdrop, manageable bond supply and strong local demand from insurance companies, we think the balance of risk is for the bond and swap curves to flatten even further."