The baht should start recovering its losses against the US dollar, supported by a decent tourism recovery and a possible Fed pivot in 4Q22 or 1Q23. A stronger baht will benefit firms with costs tied to foreign currencies and will attract hot foreign inflows to big-cap stocks.
Limited risk of further downside to the baht
The baht hit its lowest level in nearly 16 years (down 13% YTD), as sharply higher oil prices and the absence of tourism squeezed the current account. However, we believe the risk of further downside is limited, as inbound tourism is now recovering strongly. Foreign arrivals jumped to 1.2m persons in Aug (equal to about 34% of arrivals in Aug 2019), according to the Tourism Authority of Thailand, and growth should accelerate during 4Q22 tourist high season. We expect the current account deficit to trough in 3Q22, then recover to a clear surplus in 2023.