The baht appreciation below 30 baht against a US dollar would be short-lived due to accelerated transactions before the New Year, according to the Bank of Thailand.
BoT deputy governor Mathee Supapongse said on Tuesday that the exchange rate below 30 baht per dollar on Monday afternoon was the exception rather than the rule. It was caused by some operators concluding their transactions before the year-end amid low liquidity in markets.
He was responding to the exchange rate of 29.88 baht per dollar, the strongest baht in six years.
Demand for foreign exchange was volatile before New Year holiday, he said.
Mr Mathee also attributed it to the prevailing regional trend of the greenback late this year.
After the long New Year holiday, liquidity and a balance between demand and supply would be restored, leading to less volatility in foreign exchange rates, the BoT deputy governor said.
The BoT would keep the baht value in line with economic fundamentals and people should not panic about the brief fluctuation, Mr Mathee said.
The average baht value on Monday was at 30.12 baht per US dollar, he said.
The baht emerged as Asia's top performing currency, driven by the country's large current account surplus while the South Korean won was the top loser, weakening 3.5%, in 2019.
Most Asian currencies were set to end the year on a firm note, with the Taiwan dollar leading gains on Tuesday, as investors cheered fresh developments on the Sino-US trade deal front and upbeat factory activity data from China.
The White House's trade adviser said on Monday the Phase 1 deal would likely be signed next week, but said confirmation would come from President Donald Trump or the US Trade Representative.
The deal announced earlier this month has alleviated concerns about near-term escalation in tensions between the world's two top economies — a major sign of relief for currencies in Asia, most of which ended 2018 in the red.
Adding to the upbeat sentiment, data showed factory activity in China expanded for a second straight month in December, as Beijing's stimulus measures buoyed domestic demand.
The Taiwan dollar strengthened 0.5% on Tuesday, hitting its best level in more than a year. The trade-reliant economy has bucked a regional trend of growth downgrades, helped by manufacturers moving production back home from China to avoid higher tariffs.
China's yuan extended gains to a near three-week high, supported by a firmer-than-expected midpoint fixing by the central bank. Volatility was high during the year, with the currency breaching the key 7 per dollar level for the first time in over a decade in August, as trade tensions intensified.
The yuan was set for a second straight annual loss. The Singapore dollar edged up 0.1%, while the Malaysian ringgit advanced 0.3%. Investor focus will now turn to the fourth-quarter growth figures for Singapore, which is forecast to have expanded at a slightly faster pace, with economists expecting a pick-up in the services sector to compensate for a prolonged manufacturing downturn.
The Indian rupee ticked up 0.1% but was set for a second annual loss. Concerns over a slowdown in growth weighed on the rupee this year, with economists stressing on the need for more fiscal intervention.
Financial markets in the Philippines, Thailand, Indonesia and South Korea were closed for holidays. The Philippine peso and the Indonesian rupiah were up 0.2% and 0.4% respectively, in light offshore trade.
The peso and the rupiah were poised to gain about 3.5% and 3.6% respectively this year, with analysts saying these currencies benefited from demand for higher yields in a low-interest rate environment.