Question

There is a serious virus outbreak and the Thai government announces that all tourist arrivals have to spend 3 weeks in quarantine upon arrival in the country. What effect would you expect this to have on the FX markets?

Answer 1

According to me the value of THB and FX will decline.

the reason behind this can be understood from the following points

1. To spend a holiday of say a week no one will spend 3 weeks in quarantine upon arrival

2. except 3 weeks quarantine in Thailand, there might be possible that when he return to his country government of that country also ask him to be quarantine which resulst in say 6 weeks quarantine for 1 weeks trip no one can afford this quarantine period

3. due to this there will be decrease in number of tourist at Thailand. because of which the demand of THB will also decrease. the results of this decrease is decrease in value of THB

4. Similarly as numbers of tourist decrease results in decrease in demand of THB. The impact is that exchange of THB through FX will also decrease results in decrease in Forex Reserve of the Country