The baht is excessively strong, appreciating beyond what Thailand’s economic structure can handle, says caretaker finance minister Ekniti Nitithanprapas.
According to Mr Ekniti, the baht’s strengthening stems largely from the US Federal Reserve’s decision to cut interest rates, which resulted in increased capital flows into Thailand.
The baht has appreciated beyond the level Thailand’s economic structure can reasonably handle, as it is driven by net exports, he said.
The Thai currency recently reached its highest level against the US dollar in more than four years.
‘The current baht volatility is something Thailand’s economic structure is not prepared to accommodate,’ said Mr Ekniti, adding he made this point in discussions with the Bank of Thailand.
In addition, he said he issued policy directives to state-owned enterprises that rely on imports to accelerate their import activities. The Public Debt Management Office was instructed to speed up the repayment of foreign currency-denominated debt in order to exert pressure and prevent further baht appreciation.
In a related development, the Bank of Thailand issued a statement yesterday indicating it had instructed financial institutions to tighten scrutiny of forward foreign-exchange selling transactions by gold traders, as such transactions could increase the volatility of the baht.
Financial institutions are required to request supporting documents for gold sales with overseas counterparties from gold shops for every transaction.
In addition, billing documents and gold shipment declarations must be submitted within two business days from the date the gold shop delivers foreign currency, to ensure that the foreign-exchange sales arise from genuine gold exports.
The central bank is soliciting public feedback on proposed revisions to foreign exchange control regulations. Under the proposal, large gold traders would be required to report relevant transaction data to the regulator, in order to enhance transaction monitoring, assess impacts on the baht and consider appropriate related policy measures.
KEEP ON RISING
Kasikorn Research Center (K-Research) said the baht is poised to appreciate further, potentially hitting 31 to the dollar in the near term as the dollar is unlikely to rebound quickly.
The Thai currency opened at 31.5 baht to the greenback yesterday, its strongest level in four and a half years, versus Friday’s close of 31.59. China’s yuan climbed on Monday to a fresh 14-month high, trading in a rangeof 0.05% to 7.0508 per dollar in the onshore market, its strongest since Oct 8, 2024.
Year to date, the baht has appreciated 8.4%, the best-performing major Asian currency, except the 9.3% gain of Myanmar’s kyat. Month to date, the Thai currency has gained 2.3%, according to K-Research.
‘The baht and other regional currencies have been under pressure from dollar selling based on the likelihood the US Federal Reserve would continue to slash the US rates further next year following a recent cut earlier this month,’ said Kanjana Chockpisansin, head of the research, banking and financial sector at the think tank.
But the Thai currency has been appreciating faster than regional peers, partly due to soaring global gold prices and a specific technical factor.
‘The baht has appreciated quickly, passing the resistant levels of 32, 31.8 and 31.6 baht to the greenback in a short period. That has prompted traders to panic and continue to sell the dollar, causing the baht to strengthen further,’ she told the Bangkok Post.
And while the Fed’s latest dot plot indicates the possibility that the US central bank would trim the rate just once in 2026, K-Research sees the possibility of more than one cut due to the current weakness of the US economy, said Ms Kanjana.
Given that outlook, it might take longer for the dollar to recover. ‘In the short term, we see the possibility that the baht would trade in a range of 31.4 to 31 to the dollar,’ she said.
K-Research now sees the baht finishing 2025 at 32 to the dollar, much stronger than its previous forecast of 33.7. Next year, the softening Thai economy could pressure the baht to weaken to 32.8 to the greenback.
URGENT SUPPORT NEEDED
Dhanakorn Kasetrsuwan, chairman of the Thai National Shippers’ Council (TNSC), said the baht’s appreciation has had a direct impact on the export sector in terms of revenue, competitiveness and business sustainability, particularly for SME exporters, whose costs are largely denominated in baht while their revenues are earned in foreign currencies.
The TNSC believes the baht is not merely an issue of numerical exchange-rate levels, but a structural factor affecting the country’s overall competitiveness.
The rapid and excessive volatility of the baht beyond economic fundamentals has increased pressure on exporters at a time when the global economy remains sluggish, while business operating costs, interest rates and logistics costs remain high, she said.
Based on its monitoring of exporters, the TNSC found that many businesses are facing lower baht-denominated revenues after currency conversion, shrinking profit margins and weakened price competitiveness compared with regional competitors such as Vietnam, Indonesia, and India, whose currencies have appreciated less than the baht.
Exporters are also unable to raise product prices amid economic uncertainty, affecting their operating performance, employment planning and supply chains overall.
‘The key issue at present is not setting the baht at any specific level, but ensuring that excessive volatility is contained and that exporters are supported in managing exchange-rate risks effectively – especially SMEs, which continue to face limitations in accessing financial instruments.’
From the exporters’ perspective, the TNSC said there is an urgent need to place greater emphasis on appropriate exchange-rate risk management, including the use of FX hedging tools alongside cost restructuring, market diversification and reduced reliance on price-based competition. Instead, exporters should place greater focus on quality, standards and the credibility of Thai products.
At the same time, the TNSC said the government and relevant agencies should closely coordinate monetary, fiscal and trade policies to maintain baht stability, reduce short-term volatility pressures and support exporters by improving access to exchange-rate risk management tools at reasonable costs and enhancing systematic risk-management knowledge.
In the longer term, the TNSC said Thailand needs to accelerate the upgrading of its export structure, shifting from price-based competition towards value creation, brand development, technology and innovation. This would strengthen the long-term competitiveness of Thailand’s export sector and reduce its vulnerability to future exchange-rate fluctuations.
Provided by SyndiGate Media Inc. (Syndigate.info).
