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Thai baht is worst performing currency in Southeast Asia

Lack of tourist spending erodes fundamentals during first quarter

A big downturn in international arrivals has hit the Thai baht this year.

BANGKOK -- The Thai baht was the worst performer among commonly traded Southeast Asian currencies during the first quarter, as its fundamentals were eroded due to lack of tourist spending.

The baht depreciated 4% against the U.S. dollar to 31.24, according to Refinitiv data. The fall stood out from regional peers, which also were in decline.

On Wednesday, the baht reached the cheapest level in roughly half a year.

The kingdom's weakening fundamentals led to the drop. Thailand's current account turned to a deficit of $1.4 billion in the fourth quarter of 2020 from a surplus of $6.6 billion in the third quarter and $11.5 billion in the same period in the previous year. It was the first time Southeast Asia's second largest economy has recorded a deficit since the third quarter of 2014, according to the Bank of Thailand.

Service receipts from tourists plunged to $742 million, only 5% of the same period a year ago, because of border closures in response to the coronavirus pandemic.

Previously, Thailand's stable current account surplus, backed by steady tourist inflow, supported the currency.

Starting April, Thailand will shorten its mandatory quarantine from 14 days to 10 days to revive tourist inflow and spending. The government also will conduct a "sandbox experiment" at Phuket island to welcome tourists without any isolation period.

However, uncertainties remain. "Exporters and importers, as well as investors, are still unsure if the government's effort will salvage the economy," said a sales trader from a commercial bank.

The fall was also magnified by a seasonal factor. Local affiliates of large Japanese companies repatriated some of their cash before Japan's fiscal year closed in March. The seasonal trading habit has become less active as corporate management became more globalized, but still affects the market.

The depreciation at the current pace may not cause a headache for the government. When the baht hit a seven-year high in December, Prime Minister Prayuth Chan-ocha's cabinet was concerned about the adverse impact on industrial exports.

In November, Finance Minister Arkhom Termpittayapaisith said the central bank has the necessary policy tools to handle the strengthening of the baht. The central bank had liberalized foreign currency deposits, and increased the investment limit for Thai retail investors to buy into foreign securities to $5 million from $200,000. "The recent fall is not as fast nor large enough for the government to reverse such measures," said the trader.

Among other regional peers, the Indonesian rupiah and Malaysian ringgit fell 3.4% and 3.1% respectively in the first quarter. The Singaporean dollar and Philippine peso also fell over 1%, while the Vietnamese dong remained virtually flat.

The Myanmar kyat, a rarely traded currency in the region, recorded a 5.6% drop during the quarter after the Feb. 1 military coup plunged the country's economy and financial sector into uncertainty.

The Refinitiv data showed that the Myanmar kyat has not changed hands in the currency spot market since Feb. 11.

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