The Bank of Thailand is set to step up efforts to rein in the baht in the next few months by easing capital flow regulations, managing gold trading flows and lowering the current account surplus, says its chief.
The central bank is talking with related regulators to encourage outbound portfolio investment by both institutional and individual investors, said central bank governor Veerathai Santiprabhob.
The measures are expected to be implemented in the next few months, he said.
The regulator will encourage exporters to hold foreign currencies overseas longer and allow portfolio investors to invest more abroad, Mr Veerathai said.
Outbound portfolio investment would help balance massive inbound portfolio investment and is an instrument for managing the baht, he said.
On Thursday the baht weakened a bit to 30.34 against the US dollar after hitting 30.32, the highest level since June 2013, on Wednesday.
The local currency, considered a safe haven amid heightening global uncertainty, is the best-performing currency in Asia, rising more than 7% against the dollar so far this year.
The baht's strength has hampered exporters and tourism, but the central bank will monitor the currency to prevent it from rising too fast, Mr Veerathai said.
The central bank started to curb short-term offshore inflows by reducing new short-term bond supply in July. This was followed by lowering the cap on the outstanding balance of non-resident accounts from 300 million baht per person to 200 million baht and requiring reports with the names of end beneficiaries for all non-resident holdings of Thai debt securities.
A net US$4.5 billion in offshore funds flowed outwards during August-October.
Mr Veerathai said the central bank is looking into possible methods to manage gold trading flows but it has no policy in place to control trade in the precious metal.
Global uncertainty stemming from economic and geopolitical factors has stoked demand for gold, leading to significant gold trade in Thailand.
"Such activity, however, doesn't benefit nor add value to the economy," Mr Veerathai said. "On the other hand, the side effect on the economy is a stronger baht."
For the first eight months of this year, the current account surplus amounted to $25 billion, of which $4-5 billion was from gold.
Mr Veerathai said the current account surplus is a structural economic problem that warrants infrastructure investment from the public and private sectors to help lower the surplus.
Digital infrastructure investment in accordance with the country's digital economic roadmap will lead to higher imports, he said.
Mr Veerathai specified rising foreign direct investment, including project investment, mergers and acquisitions, and capital market activity, as a factor lending support to the baht's appreciation.
"Payment for asset and share acquisitions by foreign investors in transactions of around tens of thousands of baht recently is a key factor strengthening the baht," he said.
Thailand's current account surplus has continued to decline from 11.5% of the country's GDP in 2015 to 6.3% now, and the trend is expected to continue into next year because of domestic infrastructure investment.
Despite the country's economic slowdown, the governor affirmed that signs of either a recession or a crisis have not been spotted.
The Bank of Thailand recently cut its economic growth forecast for this year to 2.8%, a level below the estimated growth potential, from 3.3%. It projects growth to improve to 3.3% next year.
The central bank is in discussions with the Finance Ministry to adjust inflation targeting and will finalise plans by the end of the year, Mr Veerathai said.