The Thai Baht (THB) is facing temporary weakness due to election-related uncertainties, softer gold prices, and a firmer USD. OCBC Group Research analysts Sim Moh Siong and Christopher Wong note potential scenarios for the upcoming elections and their implications for the THB, suggesting that a clear outcome could support the currency, while a contested result may pose challenges.

Election uncertainty weighs on THB

"USDTHB extended its move overnight. Election-uncertainty risk premia, softer gold prices and firmer USD remain some of the near term drivers."

"A clear outcome allowing for the formation of majority government is the most positive as economic policies can potentially be implemented smoothly. This should also be supportive of THB, and we reckon some of the weakness can dissipate and that THB should revert to taking cues from broader macro drivers including risk sentiment, USD trend."

"In the interim, potential election-related uncertainty, rebound in USD and the recent sell-off in gold, alongside checks on FX inflows and heightened scrutiny on gold-related THB inflows are some factors that may weigh on THB."

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