Tepid exports recovery add to Vietnam, Thailand’s currency woes

An unexpectedly weak exports performance in Asia’s emerging economies risks adding pressure to their currencies already hammered by a strong dollar and the Federal Reserve’s hawkish pivot.

Data Monday showed Thailand’s outbound shipments contracted 11% in March, falling below all forecasts in a Bloomberg survey, owing in part to a higher base of comparison a year ago. Trade-reliant Vietnam saw exports rise 10.6% in April, below the 14% median estimate, as the garments, footwear and fishery sectors lagged the recovery in electronics, it said in a separate release.

That could signal continued currency weakness for both nations, especially as stubborn inflation and lackluster economic growth in key markets like the US, China and Southeast Asia damps demand for goods. The Vietnamese dong hit a historic low earlier this month, while the Thai baht is trading at a six-month low.

With Thailand recording its third straight month of trade deficit, and Vietnam’s surplus shaved down to a one-year low, fewer dollars are making their way back to replenish their foreign-exchange reserves needed for currency intervention. Both the Bank of Thailand and the State Bank of Vietnam have resisted calls for monetary easing in case it endangers their currencies further.

“Demand from overseas markets remains price-sensitive and discounts have been offered to help shore up sales,” said Brian Lee, an economist at Maybank Securities Ltd. Shipping disruptions in the Red Sea would have also pushed up freight costs and delayed deliveries, disproportionately affecting Vietnam’s exports of perishables and low-margin goods like textiles, he said.

Meanwhile, Thailand’s tourism rebound could still offset its widening goods trade deficit in the first quarter, Maybank’s Erica Tay said. However, the nation’s balance of payments has been increasingly swayed by its capital account balance. 

“It is critical that the confidence of foreign and domestic investors is shored up and for capital inflows to be forthcoming, whether in the form of portfolio or direct investments,” she said.