The Bank of Thailand said on Tuesday it was closely watching movement in the baht, which it said was depreciating as a result of external factors and in line with regional peers.
The baht fell to an 11-month low at 37.095 on Tuesday morning. The central bank was ready to manage the baht if there were irregular movements, it said in a statement, adding that investors were awaiting more clarity on the fiscal policies of the new government.
"The strengthening of the dollar (comes) from the possibility that the Federal Reserve will maintain interest rates longer than expected," said Sakkapop Panyanukul, a senior director of the Bank of Thailand.
Other factors included pressures from falling gold prices and increasing oil prices, Mr Sakkapop added.
Prime Minister Srettha Thavisin said earlier on Tuesday that a weak baht could help support exports and tourism.
Shares in Thailand and Singapore led declines across emerging markets in Asia on Tuesday, as expectations of the US Federal Reserve keeping interest rates elevated for longer weighed on sentiment.
Currencies in the region also depreciated, with most trading at multi-month lows against a stronger dollar which hit fresh highs. The baht and Indonesian rupiah were the biggest decliners in the region.
The Stock Exchange of Thailand declined as much as 1.8% to its lowest level since Jan 4, 2021. The SET Index closed at 1,447.30 points, down 22.16 from the previous session, in turnover worth 60.38 billion baht. Singapore stocks retreated up to 1% to hit their lowest in more than five weeks, and Indian shares were down 0.5%.
Broad Asian currencies have come under pressure from a surge in the US dollar and a rise in Treasury yields, with strong US economic data adding fuel to the higher-for-longer interest rate expectations.
The dollar might still pressure Asian currencies going forward, given the data coming from the US is still running strong and also due to bond issuance in the US, said Irene Cheung, senior Asia strategist at ANZ.
"It all comes to the sort of outperformance of the US economy ... still holding better compared to what we have in the region, in particular from China, which has been improving gradually but quite a slow pace,” she said.
The baht is among the worst performing currencies in the region and has lost nearly 7% so far this year
Indonesia’s central bank said it had intervened in the foreign exchange market amid market turbulence with the rupiah hitting multi-month lows to manage the supply and demand of US dollars.
Investors in Asia are awaiting inflation data from Thailand, the Philippines and South Korea this week, as well as the monetary policy decision from the Reserve Bank of India. Markets in China were closed for a public holiday.