Defying pre-Brexit nerves, the British pound has done remarkably well in 2021. It has moved from 40.5 to the Thai baht in early January to a high point of 44.58 on May 18. But the British currency has been falling against the dollar and the euro, with knock-on effects for the baht. The latest pound-baht exchange rate is 43.43.
Some currency analysts, notably Bloomberg, believe that the slide will continue for the rest of the year to push the UK currency under the 40 baht level. The pound rose in recent months largely thanks to an effective vaccination program which far outshone her European rivals. There was also mounting speculation that the Bank of England would hike interest rates which would boost the currency. That never happened.
Now coronavirus numbers have risen dramatically, with a recorded 11,000 new infections last week alone. One result is that Britain is excluded from the European Union’s “safe travel” list, whilst UK exports to the EU are 50 percent lower than they were a year ago. There is also a bitter trade dispute brewing as Britain argues with her EU neighbors about the implementation of the Northern Ireland protocol which was part of the Brexit settlement. Foreign exchange markets hate uncertainty.
Thailand itself has been in the sidelines for the most part. The balance of payments continues in the deficit range as foreign trade has been more sluggish than for neighbors such as Vietnam. Covid-19 infections have risen, especially in Bangkok, although the virus is still considered under control. The Thai prime minister has announced that Thailand will be opening up for mass tourism in October, following pilot “sandbox” projects from July, although there are several ifs and buts concerning implementation.
Actually, a weaker baht would be welcomed domestically as it would be better for international tourism and would potentially boost exports. The pound and the baht have had a roller-coaster ride in the past 30 years. In the late 1990s, one pound bought 92 baht for a short period. The pound’s lowest point was 36.6 in August 2019.