Thailand vows to curb baht swings as currency hits 4-year high

[BANGKOK] Thailand’s central bank vowed to take steps to ease baht volatility and limit the influence of gold prices after the local currency rallied to a four-year high.

The baht rallied to its highest level since June 2021 on Monday, extending its gains this year to 7 per cent. The surge is seen as a body blow to the trade-reliant Thailand as it deals with the fallout of a 19 per cent US tariff on its exports. The baht strength also discourages foreign tourists, a key source of revenue for the South-east Asian nation. 

The Bank of Thailand said baht was being mainly driven by dollar weakness and the rally in gold prices. The pledge to rein in wild currency swings is in line with previous BOT commitments to ensure an orderly foreign exchange market.  

“The Bank of Thailand continues to closely monitor baht movements and stands ready to manage volatility in order to mitigate the impact on businesses,” Assistant Governor Pimpan Charoenkwan said in a statement on Monday (Sep 8). The central bank is also weighing measures to reduce the impact of gold prices on the baht, she said, without giving further details.

Bank of Thailand Deputy Governor Roong Mallikamas said in July that the BOT and finance ministry are discussing ways to address currency moves not aligned with fundamental factors, including the impact of gold prices. The central bank views gold prices as a non-fundamental factor affecting the currency’s move. 

The baht typically gets a boost when Thais sell gold, which is highly valued as an investment, as the dollar proceeds get converted into the local currency. It also has a much closer link to gold than other emerging Asian currencies.

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“Gold really strengthened a lot,” Alan Lau, a forex strategist at Malayan Banking, said pointing to Thailand as a hub for gold trading and “the positive relationship” between the metal and currency.

The central bank said the outlook for financial markets remain highly uncertain and urged the private sector to regularly hedge exchange rate risks to minimise the impact from currency fluctuations.

The Joint Standing Committee on Commerce, Industry and Banking, a private sector group, last week reiterated its concerns about the baht’s continued rally, which it said was inconsistent with a slowing economy. BLOOMBERG