Thailand rated among least vulnerable countries to a strengthening US dollar

The strengthening US dollar since mid-April has prompted a sharp currency depreciation and/ or a significant decline in foreign exchange reserves in a number of emerging and frontier market countries.

Moody’s has published a Sector In-Depth titled “Sovereigns – Global: US dollar appreciation raises credit risk for sovereigns with large external funding needs” rating Thailand in the lowest vulnerability tier to a stronger dollar.

To the extent that these currency fluctuations reflect capital outflows or significantly lower external inflows, they are credit negative for sovereigns with large external funding needs. In this report, we analyze the vulnerability of a group of emerging markets to a strengthening US dollar and where relevant, identify mitigating factors.

Moody’s considers the sovereigns’ current vulnerability, changes in vulnerability in the last four years, and evidence of exposure to financial market shocks.

Countries with large current account deficits, high external debt repayments and substantial foreign-currency government debt are most exposed.