Local small and medium-sized importers are in a rush to hedge their currency exposure to protect against the rapid weakening of the baht, says TMB Bank.
The number of SME customers hedging against foreign exchange risk has increased by 20-30% since the baht began depreciating after the year's first policy rate cut by the Monetary Policy Committee in March, said Trirong Butragaht, chief SME and supply chain officer.
SME importers represent 70% of TMB's import-export client portfolio.
The importers' forward deals have a maturity mostly of three to six months to lock in the foreign exchange rate, betting that the baht will fall further, Mr Trirong said.
A far smaller number of exporters have engaged in hedging, as they can reap windfall profits from the downward trend of the baht versus the US dollar or the euro.
The baht has dipped more than 7% since the beginning of the year, with the pace of the currency's depreciation gaining speed since the rate-setting panel surprised the market by cutting the policy rate for a second straight meeting in April, to 1.5%
The central bank's measures to ease curbs on capital outflows, announced just a day after the April rate reduction, coupled with the clearer prospect of a rate hike by the US Federal Reserve this year also whittled down demand for the baht.
The recent yuan devaluations have stoked fears of an escalating currency war and an even weaker baht.
China devalued its currency for three days in a row last week to the tune of 4.6% before authorities rushed to quell market jitters by pledging not to let the yuan plummet.
China's central bank yesterday set the daily reference rate at 6.3969 yuan to the dollar, slightly stronger than last Friday's 6.3975.
Thai exporters have not gained price competitiveness from the baht's pullback compared with regional peers, as other currencies are weaker than the baht, Mr Trirong said.
Malaysia's ringgit leads losses in Asia over the past year with a 23% drop, battered by a political scandal, the yuan devaluation, slumping oil prices and the prospect of higher US interest rates, according to Bloomberg.
The ringgit slid 3.8% against the dollar last week as the baht retreated 0.4% and the Philippine peso fell 0.3%.
Mr Trirong said building up competitiveness in production, not foreign exchange rates, would be the main factor in reinforcing local SMEs' export business.
Even though SME clients are facing a tough situation amid a lacklustre economy, their business is expected to improve in the fourth quarter, in line with gathering economic momentum.
Progress in state budget disbursement and investment will be the driving force for the country's economic growth during the rest of this year.
The National Economic and Social Development Board yesterday said the Thai economy slowed to 2.8% growth in the second quarter from 3% growth in the first quarter.
The government's economic planning unit also slashed its full-year economic growth forecast to between 2.7% and 3.2% from 3-4% predicted in May.
TMB shares closed yesterday on the Stock Exchange of Thailand at 2.28 baht, down two satang, in trade worth 106 million baht.