The Bank of Thailand should intervene to ensure the Thai baht moves in line with other regional currencies, says the Federation of Thai Industries (FTI).
FTI chairman Payungsak Chartsuthipol said on Saturday he was concerned that the strong baht would affect the trade competitiveness of Thai manufacturers, particularly exporters.
The baht has appreciated by 1.2% against the dollar since the start of this year. It gained 3.1% in 2012 after advancing 5% in 2011. The Thai currency has been the second strongest performer in Asia so far this year, behind the Malaysian ringgit which has gained 1.8%.
Finance Minister Kittiratt Na-Ranong conceded that if the baht appreciated much more, it could affect the competitiveness of Thai exports. He contends that the gains do not reflect real demand for Thai baht.
However, demand for baht is expected to remain very high as foreign funds pour into the country's stock and bond markets in search of higher returns than in developed markets.
Average daily turnover on the Stock Exchange of Thailand has exceeded 50 billion baht since the start of this year, compared with an average of 32 billion in 2012. Foreign funds account for 20% of trade on the local stock market.
It is the duty of the central bank to oversee the short-term baht fluctuations and rapid inflows and outflows of foreign investment, said Mr Kittiratt, who is also deputy prime minister for economic matters.
Central bank governor Prasarn Trairatvorakul said the baht fluctuation was caused by foreign capital inflows to the local bond and stock markets.
He also admitted that there were signs of short-term profit-taking by foreign investors.
However, the baht's movement was in line with those of other currencies in the region and therefore no intervention was taking place at this time, Mr Prasarn said.
Thiti Tantikulanan, head of the capital markets business division at Kasikornbank, projected the baht would appreciate to 29.50 by mid-2013 and further strengthen to 29.00 baht by the end of the year.