Analysts note that a historic surge in oil prices is placing Thailand, which is highly dependent on energy imports, in a difficult position. This situation is not only increasing depreciation pressure on the Thai baht but also raising the risk of capital outflows. This month, the baht has depreciated by more than 5% against the US dollar, ranking as the worst-performing currency in Asia. Strategists at Kasikornbank forecast that, due to rising energy import costs and seasonal dividend repatriation, the baht could weaken from its current level of 32.8 per US dollar to around 33.5 by mid-year, implying a further decline of approximately 2%.

The continued decline of the baht highlights how quickly sentiment has shifted in emerging Asian markets. After a strong performance late last year, Thailand is facing significant pressure due to its heavy reliance on imported crude oil, exacerbated by oil prices surging over 40% in March. This dependency makes the baht highly vulnerable to commodity price fluctuations and capital outflows in the coming months.

Jeffrey Zhang, a strategist at Bank of East Asia, stated that the oil price shock could negatively impact Thailand's fiscal health and economic growth. He expects the baht to remain around 33 against the dollar by year-end and believes that while the USD/THB pair still has room to rise, the pace of its increase may slow compared to March.

Kobsidthi Silpachai, head of capital markets research at Kasikornbank, pointed out that rising global jet fuel prices will adversely affect Thailand's inbound tourism sector. Approximately 20% of hotel bookings in southern Thai resorts have already been canceled. If conflicts such as those involving the US and Iran persist long-term, foreign tourist numbers could drop to a three-year low, increasing the risk of an economic contraction.

However, there are initial signs that the baht could stabilize if global risk appetite improves, including a de-escalation of geopolitical tensions. Although the Bank of Thailand has room to smooth volatility, it is unlikely to aggressively defend the currency's exchange rate.

Audrey Ong, a strategist at Barclays, said, "In the short term, we expect a modest pullback in USD/THB." She predicts the exchange rate will be largely flat by the end of the year. She added, "Given the baht's relatively high valuation, we doubt the Bank of Thailand will actively intervene beyond managing excessive volatility, allowing for further adjustment."

Data indicate that seasonal factors are working against the baht as major companies enter their dividend payment periods. Over the past decade, the baht has depreciated by an average of about 1.3% in the three months leading up to June 30. According to Kasikornbank data, companies are expected to pay around 151 billion baht (approximately $4.6 billion) in dividends to foreign investors this year, which will increase demand for US dollars in April and May.

Furthermore, capital outflows are adding to the downward pressure on the baht. Data from the Thai Bond Market Association show that global funds have net sold $788 million of Thai bonds this month, the highest level in over a year. Simultaneously, data from the Stock Exchange of Thailand indicate an outflow of $1.2 billion from the equity market during the same period, the largest since February 2023.

Jitipol Puksamatanan, investment strategist at Finansia Syrus Securities, commented, "Investors are growing increasingly concerned that the government is failing to effectively address the current economic situation, which is further weighing on market sentiment."