The baht fell to its lowest level since late November after the government raised its Covid-19 alert to the second-highest level, further dampening tourism.
Thailand’s baht fell as much as 1% to 33.523 against the greenback this week. The drop is in response to the government raising its COVID alert levels. As of Saturday, the thai baht to USD was trading at 0.30.
This included discouraging dining and consuming alcohol in restaurants, leaving the house and taking public transit, as well as travelling abroad.
According to Mingze Wu, a foreign-exchange trader at StoneX Group in Singapore, the Thai baht is very sensitive to Covid-19 curbs due to its huge tourism industry.
With a loss of more than 10% in the last year, the baht has been the worst-performing currency in emerging Asia, as the pandemic has hit the tourism-dependent economy.
In addition, higher energy import prices and potential rate increases in the US weigh on the nation’s currency.
After finding the Omicron virus variant, authorities temporarily banned tourists from entering the country under the two-month-old guarantee free test & go program.
The health ministry recommended freezing the Test & Go program until the Omicron variant could be contained.
Baht predicted to gain strength
In Singapore, Bloomberg Intelligence’s FX & rates strategist Philip McNicholas says virus alerts, dent reopenings, and recovery hopes have compounded the baht’s losses from the FOMC minutes that were more hawkish than expected.
However, given the market’s consistent underestimation of Thailand’s balance of payments, this knee-jerk reaction is unlikely to last, McNicholas said.
MUFG Bank’s senior currency analyst Jeff Ng said the baht may gain strength as the year progresses due to a potential trade and current-account surplus.
The Bank of Thailand forecasts that the baht will reach 34 per dollar in the first quarter before recovering to 33.75 in the fourth quarter.
Meanwhile, according to the Tourism Council of Thailand (TCT), the prolonged suspension of the Test & Go scheme could cost the tourism sector at least 7 billion baht in January and undermine tourism confidence in the long run.
Chamnan Srisawat, president of TCT, said that the uncertainty of the Test & Go program not only affected tourist numbers temporarily but also negatively affected Thailand’s travel confidence for years to come.
In November and December, the number of tourists averaged around 200,000 per month. However, the council estimates that the number of tourists in January will fall to 100,000.
Due to the suspension of Test & Go, the tourism industry could lose up to 7 billion baht in revenue due to the lack of international arrivals, Srisawat said.