Bank of Thailand ready to curb recent baht strength

Bank of Thailand ready to curb recent baht strength

The Bank of Thailand is concerned the baht's soaring value could imperil an already fragile economy. (Bangkok Post photo)
The Bank of Thailand is concerned the baht's soaring value could imperil an already fragile economy. (Bangkok Post photo)

The Bank of Thailand said it’s concerned about a recent rapid appreciation in the currency and added it’s ready to take steps to curb a climb that could imperil an already fragile economy.

The baht’s near 2% rise against the dollar in the past month is among the steepest in Asia, aided by dwindling Thai coronavirus cases, an easing national lockdown and a shallower-than-expected first quarter economic contraction.

This backdrop may attract short-term capital flows to the baht, and its performance may be out of line with economic fundamentals, the central bank said in a statement on Monday.

“The Thai central bank is ready to take necessary steps to ensure baht strength doesn’t aggravate the fragility of the economy,” deputy governor Mathee Supapongse said in the statement, adding it will also scrutinise gold trading as that may have contributed to the currency’s performance.

Thailand’s economy relies on tourism and trade, both of which have been badly damaged by the novel coronavirus pandemic. Officials expect an economic contraction of as much as 6% this year and are sensitive to currency strength that could hamper competitiveness.

The government has started loosening a lockdown, though incoming flights are still banned for the tourism-dependent economy.

“We are wary that the pace of any recovery could disappoint,” says Irene Cheung, foreign exchange strategist at Australia and New Zealand Banking Group. She sees the baht weakening to 33.50 per dollar by end-June.

The baht’s rally may also face headwinds from technical factors. The currency breached resistance around 32.00 per dollar but further gains have been limited by its 100-day moving average. Slow stochastics, a momentum indicator, also shows that the baht is in the overbought territory.

The baht strengthened 0.2% against the dollar as of 8.50am, appreciating for a fifth straight day.


Do you like the content of this article?
COMMENT (53)

US imposes sanctions on Moscow, expels 10 Russian diplomats

WASHINGTON - The United States announced sanctions against Russia on Thursday and the expulsion of 10 diplomats in retaliation for what Washington says is the Kremlin's US election interference, a massive cyber attack and other hostile activity.

20:45

Myanmar force arrests anti-coup leader

Myanmar security forces arrested on Thursday one of the main leaders of the campaign against military rule after ramming him with a car as he led a motorbike protest rally, friends and colleagues said.

19:42

From India, Myanmar's ousted lawmakers work on challenging junta

In a spartan hillside room in India furnished only with a thin sleeping mat, the Myanmar member of parliament spends much of his days attentively listening to Zoom conference calls and tapping away messages on his smartphone.

18:31