The Bank of Thailand has flagged concerns that a fast rise in the baht may not help the country, noting it stands ready to take action to avert the baht from gaining, adding more pain to the economy.
Given the improving coronavirus situation in Thailand and the region, some investors could park their short-term money in the country and such practice is not wanted by the Bank of Thailand, Mathee Supapongse, deputy governor of the central bank, said in a statement.
Even though Thailand has reasonably contained the Covid-19 outbreak compared with several countries in the region, and the country's economic growth for the first quarter beat the market's forecast, several business sectors have been ravaged by the spread and the impact will become apparent when the second quarter economic reading is released, he said.
The economy shrunk 1.8% from a year earlier during January to March, marking the first contraction since early 2014.
The Bank of Thailand recently predicted the economy would drop 5.3% this year, assuming a coronavirus vaccine is ready next year. It also expects the deepest contraction will be seen this quarter before improving gradually in the second half.
Standard Chartered Bank Thai has predicted the economy would shrink by 13% year-on-year in the April-to-June quarter.
"The central bank is ready to consider necessary measures to prevent the baht's strength from adding to fragility in the economy," said Mr Mathee.
The local currency appreciated to the highest level in two months at 31.74 to the dollar yesterday, and rose 1.8% in May, the biggest monthly gain in 2020. Yet the baht, which was Asia's best performing currency last year, has dipped 5.8% year-to-date.
Mr Mathee said the surge in gold prices played a role in pushing up the baht, so the central bank will examine gold dealers' transactions as to whether they complied with regulations, as well as consider additional measures to curb the baht's rise.
A swift change in the outlook for Covid-19 and global financial markets, coupled with direct investment by both the public and private sectors could reverse the baht trend.
The central bank recommends those with foreign currency exposure hedge against risks from the baht's future two-way trends, he said.