The Bank of Thailand has continued to manage the baht's value through foreign exchange intervention, a short-term measure used to help propel the economic recovery momentum.
The central bank previously managed the movement of the baht against foreign currencies through policy rate cuts, but the benchmark interest rate is currently at a record low of 0.5% per year, said governor Sethaput Suthiwartnarueput.
For the past five years, the central bank has continued to intervene in the foreign exchange rate, resulting in an accumulation of foreign reserves worth about US$100 billion, he said.
The central bank continues to manage the movement of the exchange rate as reflected by rising international reserves. Thailand's foreign reserves were registered at US$252 billion (7.7 trillion baht) as of Nov 6, up from US$249 billion logged on Oct 30.
"Higher foreign reserves are not desirable. Let's say that the baht strengthens by 1 baht [against the US dollar], the central bank's foreign reserves could increase by US$100 billion [through foreign exchange intervention]. This could book losses of $100 billion on a mark-to-market basis," Mr Sethaput said.
The baht has strengthened by 4.3% against the greenback since the last Monetary Policy Committee (MPC) meeting on Sept 23.
On a year-to-date basis as of yesterday, the baht depreciated by 1.45% against the dollar, ranked second for currency depreciation against the greenback after the Indian rupee (-3.8%), according to Reuters.
According to an MPC meeting on Wednesday, the committee expressed concerns over the rapid appreciation of the baht as this affected the fragile economic recovery.
The baht appreciated rapidly against the dollar owing to a risk-on sentiment following the US presidential election outcome and the progress in Covid-19 vaccine development, according to an MPC statement.
The MPC will closely monitor developments in the foreign exchange market and movements of capital flows as well as consider the necessity of implementing additional appropriate measures.
In a normal economic situation, the stronger baht would not have induced a significant impact on export volumes, but rather dampen profit margins of exporters, said Mr Sethaput.
But with the ongoing Covid-19 pandemic crisis and ebbing global demand, the baht appreciation would deal a heavy blow to Thai exports as well as putting pressure on the country's employment rate and asset quality of businesses, he said.
With this scenario prevailing, it would affect Thailand's economic recovery momentum where the outlook is marred with high uncertainties, said Mr Sethaput.