The baht could weaken beyond 33 to the US dollar and face heightened volatility if the conflict in the Middle East persists, as higher oil prices would increase Thailand’s import costs, according to Kasikorn Research Center (K-Research).
The Thai currency slipped to a three-month low of 31.95 per dollar in offshore trading on Tuesday before recovering to around 31.73–31.75 on Wednesday, compared with Monday’s close of 31.45, said Kanjana Chockpisansin, head of research for banking and finance at the think tank.
The depreciation was driven by investors shifting funds from risk assets and gold into the US dollar, which is widely viewed as a safe-haven currency. The greenback has also been supported by expectations that the US Federal Reserve will cut interest rates more gradually than previously anticipated, as rising oil prices could push US inflation higher, she said.
“If the war in the Middle East drags on, oil prices are likely to remain elevated for an extended period, which would significantly affect Thailand because the country is a net oil importer,” Ms Kanjana said.
Higher oil costs could sharply reduce Thailand’s trade balance and potentially turn the country’s narrow trade surplus into a deficit.
K-Research estimates the baht could weaken to around 32.8 per dollar under a worst-case scenario linked to the Middle East conflict.
However, if oil prices remain above US$100 per barrel for a prolonged period, the currency could slide close to 33 per dollar, she added.
Global oil prices have risen sharply this year, with Brent crude’s front-month contract climbing 35.7% year-to-date and West Texas Intermediate crude up 31.2%.
Thailand spends roughly 5–6% of its GDP on oil imports, a higher proportion than many neighbouring Southeast Asian economies, according to K-Research.
The baht has also become more volatile, with fluctuations rising from 7% last year to 7.7% so far this year, reflecting weaker domestic economic conditions, Ms Kanjana said. Typical median volatility ranges between 3% and 5%.
Meanwhile, SCB Financial Markets expects the baht to trade between 31.6 and 31.9 per dollar in the near term as the US dollar strengthens amid escalating tensions in the Middle East.