The baht sprinted into the new year before falling past the 30-mark against the US dollar amid speculation that the central bank had stepped in to curb the local currency's gain.
"We expect the central bank to step in to weaken the baht after the currency passed 30 to the dollar on Dec 30," said Roong Sanguanruang, vice-president for global markets research at Bank of Ayudhya (BAY). "The central bank is expected to continue preventing the local currency from strengthening past 30."
On Thursday the baht dropped to 30.11 against the greenback after it touched a fresh six-year high of 29.90 on Monday. Thai markets were closed Tuesday and Wednesday for the New Year holiday.
The baht retreated against the dollar in line with other emerging currencies on Thursday, Mrs Roong said. The anaemic trade volume as the holiday approached allowed some investors to easily manipulate the baht, while the country's fundamentals also contributed to the previous gain, she said.
The baht was the best-performing currency in Asia last year, up nearly 9% against the dollar, as investors perceived it as a safe haven because of Thailand's high current account surplus and foreign reserves.
BAY forecasts the baht to hover in a band of 30-30.25 to the dollar this week amid the Bank of Thailand's close monitoring, but the expectation is for the currency to break 30 again.
Mrs Roong said BAY is likely to review its forecast for the baht of 29.85 by the end of this year, as the local currency is expected to be stronger than predicted.
Vachira Arromdee, assistant governor of the Bank of Thailand, said the foreign exchange market's liquidity is returning to normalcy but the baht faces high volatility.
"The central bank will monitor the baht's movement closely," Ms Vachira said. "Market participants can wait and observe the market's situation before making transactions."
Operators' worries
Phaibul Kanokvatanawan, chief executive of The Mall Group, expressed growing concern about the baht surge, saying the stronger baht would be a bump in the road for the overall retail industry, particularly with Chinese New Year, another peak sales season, at the end of this month.
"The government should tackle the strong-baht problem as fast as possible, otherwise measures devised to stimulate the economy this year will be fruitless," Mr Phaibul said.
Kriangkrai Tiannukul, vice-chairman of the Federation of Thai Industries (FTI), urged the central bank to unveil short-term measures to thwart the firmer baht.
"The FTI forecasts the baht to stay around 29-30 per dollar, so many exporters will adversely suffer," he said.
Suwat Kamolpanus, chairman of the FTI's renewable energy club, said that while the baht's run-up is taking a toll on exports, it will offer greater opportunities for local energy firms to accelerate their hefty investment outlay, particularly for new machinery imports and overseas investment.
Narathip Wirunechatapant, chief executive of Jaymart Mobile, the mobile phone distribution arm of SET-listed Jay Mart, said a stronger baht usually makes imported gadgets and mobile accessories cheaper, but this is not the case for smartphones. The same models are priced similarly, regardless of where they are bought.
The baht appreciation could dent net profits for the electronic parts sector by 6% this year, as almost all earnings in the sector are generated in foreign currencies, with the dollar and the euro as the main currencies for transactions, according to the Asia Plus Securities (ASP) research department.
Every one baht in appreciation will hit net profits of SET-listed firms in the electronic parts sector by 5.2-6.2%, including Hana Microelectronics, Delta Electronics Thailand, KCE Electronics and SVI, ASP said in a research note.
Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers' Council, said the recent baht surge deepened exporters' worries, but most still believe the central bank will find solutions for the appreciation.
Pimchanok Vonkorpon, director- general of the Trade Policy and Strategy Office, said the government, including the Commerce Ministry, has never not acted when the baht gained as much as 0.9% in a short period.
Tourism receipts
Yuthasak Supasorn, governor of the Tourism Authority of Thailand, said tourists are cautious about spending, with the agency monitoring Chinese spending for the Lunar New Year later this month.
Though the baht reversed the trend, overseas tourism receipts targeted at 2.02 trillion baht this year could be affected if the local currency resumes an upward trajectory.
Vichit Prakobgosol, president of the Association of Thai Travel Agents, expressed concern about lower tourism revenue. While the consequences of the trade war and the global economic slowdown loom, the tourism sector expects the Finance Ministry and the central bank to come up with effective measures to maintain the baht at 30-31 per dollar throughout the year.
The Tourism and Sports Ministry should increase competitiveness among neighbouring countries, such as by granting multiple-entry visas to attract more quality tourists, Mr Vichit said.
The government should also consider extending the waiver on the 2,000-baht visa-on-arrival fee from April 30 to Dec 31, he said.