Baht Falls Most in a Month as Thailand Raises Covid Alert Level

(Bloomberg) -- The Thai baht fell the most since late November after the government raised the Covid-19 alert to the second-highest level, further dimming the recovery of the tourism sector.

The baht fell as much as 1% to 33.523 per dollar. That's after the Thai government on Thursday heightened the alert level from 3 to 4, a category that includes new guidelines to discourage dining and consuming alcohol in restaurants, leaving the house and using public transport as well as traveling abroad.

“The Thai baht is pretty sensitive to Covid-19 curbs due to the huge tourism industry,” said Mingze Wu, a foreign-exchange trader at StoneX Group in Singapore.

The baht is the worst-performing currency in emerging Asia in the last 12 months with a loss of more than 10%, as the pandemic hit the tourism-dependent economy. The nation's currency is also weighed by more expensive energy imports and potentially faster hikes in U.S. interest rates.

The appearance of the omicron virus variant had pushed Thai authorities on Dec. 21 to temporarily ban an almost two-month quarantine-free entry of tourists. The health ministry had recommended extending the suspension until the end of the month.

“The heightened virus alert, denting reopening and recovery hopes have compounded pressure on the baht created by a more hawkish than anticipated FOMC minutes overnight,” said Philip McNicholas, FX & rates strategist at Bloomberg Intelligence in Singapore. “That said, the market appears to have consistently underestimated the recovery in Thailand's balance of payments, suggesting this knee-jerk reaction may not last.”

As the year progresses, the baht may regain strength on the back of a potential trade and current-account surplus, said Jeff Ng, a senior currency analyst at MUFG Bank. The bank's forecast is for the baht to reach 34 per dollar in the first quarter before recovering to 33.75 in the fourth quarter. 

The Thai baht pared losses to trade 0.8% weaker at 33.44 as of 2:57 p.m. local time.

©2022 Bloomberg L.P.