Oil Risks Signal Thai Baht Weakness Against US Dollar - MUFG

1.00% remains the Bank of Thailand’s (BoT) policy rate for a fourth consecutive meeting, notes MUFG’s Lloyd Chan. The central bank continues to project modest Gross Domestic Product (GDP) growth in 2026 and 2027. While AI-related export demand provides some support, higher oil prices and household debt constrain tourism and consumption. With its USD/THB forecast unchanged, MUFG retains a cautious view on the baht.

Low yields weigh on baht outlook

"Meanwhile, the Bank of Thailand left its policy rate unchanged at 1.00% for a fourth straight meeting yesterday. This is in line with our expectations. The central bank expects Thailand’s GDP growth at 2.4% for 2026 and 2.1% for 2027."

"AI-driven demand could help support growth, with exports rising 24%yoy in September. However, the BoT noted that tourism and private consumption remain constrained by higher oil prices, elevated household debt and weak purchasing power."

"We remain cautious on the baht given the low yield, and we maintain our USD/THB forecast of 34.10 by end-2026, with risks tilted towards further THB weakness should the oil shock intensifies."

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