HKD/THB Outlook:
The HKD/THB is likely to decrease as it currently trades below its 3-month average and near recent lows, pressured by ongoing currency management in Thailand.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority’s interventions are counteracting the Baht’s strengthening, which is being driven by the Thai central bank's tighter currency controls.
• Risk/commodities: Oil prices are at recent highs, which can support the Thai economy but may create volatility in the exchange rate relationship.
• One macro factor: The Thai Finance Ministry's concerns about a strong Baht harming exports may lead to policy shifts that could impact its value.
Range:
The HKD/THB is expected to drift within its 3-month range but may test recent lows given external pressures.
What could change it:
• An increase in demand for HKD due to more Southbound Stock Connect inflows could provide upward pressure.
• Further tightening of currency controls by the Bank of Thailand could lead to additional downward pressure on the THB.