HKD/THB Outlook: Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The interest rate differential between the Hong Kong Dollar (HKD) and the Thai Baht (THB) has widened, with the HKMA's near-zero rates contrasting sharply with the Bank of Thailand's recent cut to stimulate growth, creating pressure on the HKD.
• Risk/commodities: Oil prices are currently at 90-day highs, impacting the Thai economy positively but adding to inflation concerns, which can undermine the THB's gains.
• One macro factor: Thailand's economic growth is projected to remain below potential in 2026, which may affect confidence in the Baht's strength moving forward.
Range: The HKD/THB rate is likely to hold within its recent range, given the lack of strong drivers for significant movement in either direction.
What could change it:
• Upside risk: A substantial recovery in Hong Kong's economic indicators may bolster the HKD.
• Downside risk: Ongoing weakness in Thailand's economic performance could affect the THB negatively, putting pressure on the HKD as well.