The Bank of Thailand insists it is committed to managing the baht's appreciation against the US dollar, with a view to easing its impact on the real economy.
Pimpan Charoenkwan, the central bank's assistant governor for financial market operations, said the regulator is monitoring the baht's movement against the dollar, paying attention to both its appreciation and volatility.
"The central bank is prepared to intervene and manage the baht's fluctuations when the currency experiences irregular movements, to mitigate the impact on the real sector," she said.
The baht has appreciated against the dollar this year, becoming one of the leading currencies in the region. External factors have been the primary drivers behind the baht's strength, noted the central bank.
Ms Pimpan said a weakening dollar, driven by the US Federal Reserve's interest rate cuts, has been a significant factor in driving up the baht's value. In addition, the market expects the Fed may trim interest rates more than previously anticipated.
China's yuan also strengthened against the dollar after Beijing introduced an economic stimulus package, which has contributed to the firming of regional currencies, she said.
Internal factors such as foreign capital inflows and rising gold prices have also contributed to the baht's strength against the greenback, according to the central bank.
Ms Pimpan said foreign capital has flowed into Thailand's stock and bond markets since August.
Global gold prices recently hit a record high of US$2,670 per ounce, supporting the baht's appreciation, as local traders increased gold imports.
Year-to-date, the baht has ranked as the second strongest currency in the region, appreciating 3.8% against the dollar, following the Malaysian ringgit, which gained 11%.
The Singapore dollar and Indonesian rupiah appreciated by 2.2% and 1.5%, respectively, according to central bank data.
However, the Philippine peso, South Korean won and Taiwan dollar have depreciated by 1.3%, 3.5% and 3.9%, respectively, against the US dollar so far this year.
Yesterday the baht opened at 32.60 per dollar, marking its strongest level in 30 months, up from Tuesday's close of 32.85. During the day, it traded within a range of 32.57 to 32.69.
Kasikornbank (KBank) reported the US dollar weakened sharply following lower than anticipated US consumer confidence data for September. As a result, markets now predict a larger policy rate cut from the Fed.
In addition, China's substantial stimulus package surprised some markets, further strengthening the yuan and supporting regional currencies, including the baht, noted the bank.
Given these factors, KBank expects the baht to continue gaining strength, potentially reaching 32.50 per dollar.