The Thai baht surged to its strongest position in 30 months, reaching 32.56 against the dollar on Wednesday, buoyed by China’s expansive stimulus measures that have positively impacted risk assets worldwide. This increase, representing a 0.8% rise, marks the highest level for the currency since March 2022. Strong capital inflows into Thai equities and bonds have further enhanced market sentiment, pushing the benchmark stock index close to a one-year high.
China’s significant economic stimulus has been a key driver behind the rally of Asian currencies this quarter, with the baht’s impressive 12% gain being the second-largest in the region, trailing only the Malaysian ringgit. However, the swift appreciation of the baht is raising concerns among exporters, as it diminishes their competitiveness in international trade. This situation has led to growing calls for the Bank of Thailand (BOT) to intervene and potentially lower interest rates to protect vital sectors such as exports and tourism, which are crucial to Thailand’s $500 billion economy.
“The issue of a strong baht is certainly on the radar for policymakers,” stated Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. He added, “However, if the trend of a weak dollar prevails, any intervention measures may not be immediate. For now, it seems likely they will adopt a wait-and-see approach, though we cannot dismiss the possibility of a response.”
Finance Minister Pichai Chunhavajira and BOT Governor Sethaput Suthiwartnarueput are set to meet next week to discuss the implications of the baht’s strength. A decision regarding interest rates is expected in October.
In a positive sign for the Thai economy, global funds have invested over $400 million into Thai bonds in September, marking the third consecutive month of net foreign inflows, according to Bloomberg data. Additionally, they purchased approximately $1 billion in local equities during this period, indicating the first net inflow in five months, partly fueled by the government’s initiative to revitalize the local market through a new fund subscription offer.
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