Brown Brothers Harriman’s (BBH) Elias Haddad reports USD/THB has bounced from key support at 31.00 after the Bank of Thailand unexpectedly delivered a second consecutive 25 bps rate cut to 1.00%. While policymakers voiced concern about Baht appreciation and exporters’ conditions, BBH notes Thailand’s positive real rates and solid external backdrop still support an underlying THB uptrend.

Surprise easing but THB trend intact

"USD/THB bounced off key support at 31.00. Bank of Thailand (BOT) unexpectedly delivered a back-to-back 25bps policy rate cut to 1.00% (no change was expected). The BOT Committee voted 4 to 2 to cut the policy rate by 25bps. Two members voted to maintain the policy rate at 1.25%."

"Importantly, the Committee expressed “concern over signs of exchange rate misalignment from economic fundamentals,” adding that the “appreciation of Thai baht has tightened financial conditions for exporters, particularly for products facing intense price competition and low profit margins”. Nevertheless, Thailand’s relatively high positive real rates and favorable balance of payments backdrop continue to underpin the uptrend in THB."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)