TD Securities: Buy INR/THB

TD Securities write “the macro picture suggests more short-term pressure is likely to build on THB.”

• “Brent crude may revisit the triple digit mark at some point which spells trouble for Thailand's current account balance given their status as a big net oil importer.”
• “Positive carry from this trade adds to the allure (3.9% annualized implied by forwards), with INR screening as one of the highest positive carry signals among EM relative to the low-yielder nature of THB.”
• “India's capital inflows are also picking up which should underpin INR strength while the climb in bond yields from RBI's surprise bond sale plan should help to attract further inflows from a carry perspective.”
• “In the current global macro environment this trade should generally perform in a risk-off/rates higher environment as THB underperforms the relative stability of INR.”
• As such, they recommend long INR/THB at THB0.4371 (via 3-month NDF, reference THB0.4330), spot target THB0.4560 (Nov'22 levels) in the next 3 months, with a stop loss set at THB0.4261 (100dma).