What To Know
- Rising nearly 8% this year, the baht’s unexpected rally has sparked concerns among exporters, tourism operators, and business leaders who fear the appreciation is eroding competitiveness at a time when Thailand is already under pressure from a 19% US tariff on exports.
- The recent election of Anutin Charnvirakul as prime minister helped ease investor concerns over a prolonged deadlock, leading to a $131 million inflow into Thai bonds, the largest in three months.
Bangkok Business News: Baht Hits a Four-Year High
The Bank of Thailand (BOT) has stepped forward with strong assurances to curb volatility in the local currency after the baht surged to its highest level since June 2021. Rising nearly 8% this year, the baht’s unexpected rally has sparked concerns among exporters, tourism operators, and business leaders who fear the appreciation is eroding competitiveness at a time when Thailand is already under pressure from a 19% US tariff on exports. This Bangkok Business News report finds that policymakers are now weighing targeted measures to reduce the impact of non-fundamental factors like gold trading on the baht.
The Bank of Thailand pledges swift action as the baht soars to a four year high.
Image Credit: AI-Generated
Central Bank Vows to Act
Assistant Governor Pimpan Charoenkwan confirmed that the central bank is closely monitoring the situation and is prepared to step in to ensure order in foreign exchange markets. She highlighted that gold prices, along with dollar weakness, have been key drivers of the baht’s rise, with discussions underway on how to neutralize the distortions created by heavy gold flows. Deputy Governor Roong Mallikamas echoed these concerns, stressing that gold’s outsized influence has decoupled currency movements from Thailand’s economic fundamentals.
Business Community Sounds Alarm
The Thai Chamber of Commerce has urgently called for government action, warning that a persistently strong baht could erode export competitiveness and undermine fragile economic recovery. Chairman Poj Aramwattananont emphasized that the exchange rate should reflect Thailand’s real economic capacity rather than being distorted by speculative flows. “An overly strong baht destroys the country’s competitiveness,” he said, urging authorities to act decisively.
Gold Trading a Major Influence
Thailand’s unique position as a gold trading hub means local currency movements are often linked to fluctuations in the precious metal. When domestic investors sell gold, dollar proceeds are converted into baht, strengthening the currency further. Analysts note that this close relationship makes the baht more sensitive to global gold prices than most other Asian currencies. Alan Lau, a forex strategist at Malayan Banking, explained that the “positive relationship” between gold and the baht has amplified recent swings.
Political Stability Adds Fuel
While gold has been the main driver, analysts also point out that easing political uncertainty has played a role in supporting the baht. The recent election of Anutin Charnvirakul as prime minister helped ease investor concerns over a prolonged deadlock, leading to a $131 million inflow into Thai bonds, the largest in three months. This influx of foreign funds has added more upward momentum to the baht, complicating the BOT’s balancing act.
Outlook Remains Uncertain
The BOT has reiterated its warning that global financial conditions remain highly unpredictable and advised businesses to hedge against exchange rate risks. The Joint Standing Committee on Commerce, Industry and Banking has also voiced unease, describing the baht’s current trajectory as inconsistent with Thailand’s slowing economy. As policymakers weigh intervention, the debate over whether to defend competitiveness or allow market forces to dominate is intensifying.
What It Means for Thailand
Thailand stands at a critical juncture where the strength of its currency, once seen as a symbol of resilience, could now undermine growth. With exporters facing higher costs, tourists discouraged by unfavorable exchange rates, and the private sector calling for urgent action, the coming weeks will be pivotal in shaping the central bank’s next move. Investors and businesses alike are watching closely to see if the BOT’s promise of stability will match the urgency of the moment.
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