The Bank of Thailand plans to roll out a foreign exchange option with a lower fee to encourage small and medium-sized enterprises (SME) to access forex hedging tools in dealing with the firmer baht.
The measure is in cooperation with the Office of Small and Medium Enterprises Promotion (Osmep), the Thai Bankers' Association and the Export-Import Bank of Thailand.
Central bank governor Veerathai Santiprabhob said the product will be an option contract that gives the customer the right but not the obligation to buy or sell a given quantity of currency at a strike price on a given date.
Given the different features from forward contracts, option contracts do not obligate holders to have sufficient money to cover the amount of the contract in their balance, making it friendlier for small businesses, he said.
Mr Veerathai said fees for the option will vary by bank.
"Commercial banks are offering hedging products with different fees and spreads that are too high for small businesses," he said.
He said the product's lower fee will be partly subsidised by Osmep's budget.
"We want to educate these SMEs to hedge more to perform better in the long term as currencies are becoming more volatile," said Mr Veerathai.
He said the measure will be submitted soon for cabinet approval.
The baht is the best-performing currency in Asia, rising 7.1% against the US dollar year-to-date. The dollar's retreat and Thailand's strong current account surplus are attributed for the sharp gain.
Mr Veerathai said the stronger baht this year was down to a number of factors, not merely short-term fund inflows. These factors include weakened confidence in the US economy and politics, Thailand's strong current account surplus and a major direct investment deal in late July.
"Some of the top gaining currencies also saw their value drop because of geopolitical risk, making the baht's appreciation leapfrog its regional peers," he said. "However, we see no significant amount of money flowing into Thai short-dated bonds as happened earlier in the year."
Mr Veerathai said the central bank's measure to cut its issuance of short-dated bonds coupled with lower issuance of government bonds in the final months of the fiscal year helped lower the yield of short-term bonds, dampening motivation for foreigners to park their money in Thailand.
He said the Bank of Thailand noticed strong growth in external sectors, such as exports and tourism, have started to pass on to other sectors of the economy.
"It's normal for some sectors to recover faster than others, and exports and tourism will be the main engines driving growth this year," said Mr Veerathai.
Employment and overtime rates in export-related sectors started to rise and these should soon support other sectors such as consumption and investment, he said.
Separately, the central bank will extend PromptPay's service to e-wallet top ups, bill payment and request-to-pay services in the coming months. From next month, PromptPay users can top up their e-wallet for the same fee as transfers between banks.