Bank of Thailand governor Veerathai Santiprabhob has voiced concerns over the rapid baht run-up but confirmed that no speculation has been detected.
The central bank is closely monitoring foreign fund flows, he said.
"The central bank has not found any irregularity or speculative practice, but the baht's fast appreciation has given us cause to worry," Mr Veerathai said.
The central bank stands ready to cope with any irregularities in the foreign exchange market, but it must be done cautiously amid the trade spat between the US and China to prevent other countries from perceiving the action is aimed at trade benefits, he said.
Mr Veerathai insisted the stronger baht does not stem from December's 25-basis-point policy rate hike, given net fund outflows worth nearly US$300 million as of Feb 13, 2019 from investment portfolios.
Of the total, foreign investors cashed out $407 million from Thai bonds, but they bought a net $123 million in Thai shares.
According to a breakdown of the net outflows in Thai bonds, foreign investors unloaded short-dated bonds worth a net $860 million, but they scooped up $453 million in long-term notes.
The picture of offshore fund flows this year contrasts with the same period last year when foreigners flooded into short-term Thai bonds but dumped local equities.
He said Thailand's current account surplus and external factors have contributed to the firmer baht.
In 2018, Thailand's current account surplus was $37 billion, of which $23 billion was derived from exports and the remaining $14 billion from tourism. However, the 2018 current account surplus was narrowed from the year before.
Although Thailand's merchandise shipments contracted for the second straight month last December, the current account was still in surplus of $5 billion, with contributions from exports and tourism evenly at $2.5 billion.
Foreign direct investment has also lent support to the baht's strength, said Mr Veerathai.
He said global uncertainties including the US economic policy, the US Federal Reserve's monetary policy, the trade dispute between the US and China, and Brexit have affected money and capital markets across the world, including the baht.
The baht is moving in tandem with other currencies in emerging markets, propelled by the US dollar's weakness and the Fed's signal of a slower pace in rate hikes, said Mr Veerathai.
"Even though the baht's volatility is lower than other regional and emerging currencies, several currencies can cope with foreign exchange volatility better than the baht. We need to strengthen buffers and sustain economic growth to handle the higher uncertainty," he said.
Foreign exchange risk protection is necessary for business operators with overseas exposure, said Mr Veerathai.
INFLUX OF FUNDS
Up to 100 billion baht in foreign funds is anticipated to flow into the Stock Exchange of Thailand (SET) over the next 12 months, projects Krungsri Securities (KSS).
The brokerage firm has a positive outlook for Thai stocks this year with a prediction the SET index will reach 1,900 points.
Earnings of SET-listed firms are expected to grow 10%, with inflation of 1.5% and GDP grows 4.1%, said Isara Orderfolchedt, KSS's head of research.
He also forecasts fund inflows to return to Thailand as well as other emerging markets.
The US-China trade war, Brexit and China's economic slowdown continue to raise uncertainty around Thailand's equity performance. Mr Isara said Thai politics should not be of much concern as it will take time before a new government can form following the general election, and he expects the nation's main economic policies to not be changed anytime soon.
He said the best sectors to invest in this year include commerce, retail, tourism and banking.