Thai baht – Central Bank to step in?

Its been on the news quite a bit in the past few weeks that because the Thai Baht has strengthened 2.5% YTD  

Overseas investors have bought $1.2 billion more sovereign notes than they sold this month through Feb. 8, Thai Bond Market Association data show. Finance Minister Kittiratt Na-Ranong said on Jan. 31 there’s concern the strong baht, which has rallied 2.5 percent against the dollar this year, will hurt tourism and exports. The Bank of Thailand may unveil measures to curb foreign inflows at a meeting on Feb. 20, according to Disawat Tiaowvanich, a currency trader at Bangkok Bank Pcl.

Source: Bloomberg

When discussing with colleagues, clients and friends about the Thai baht, we’ve always said we expect for the Thai baht to eventually return to 25 vs the dollar (pre asian crisis level), of course we don’t know when but it wouldn’t be a surprise at all if it were to happen within the next 5 years, also Thailand’s capital markets are too small to fight a currency strenghtening and we do fear that if the BOT does try to step in that they will eventually lose. On the other hand my friends/clients in manufacturing come back saying that Thailand cannot afford to allow its currency to strengthen as it would make Thailand less attractive to invest in and would hurt the tourism market dramatically. I can only say that, look, things can’t just only stay the same, this place has to continue to grow, and naturally a stonger currency will be a result of that, manufacturers have to up their machineary investments, tourism operators improve their services and offerings, and yes while it is easier said than done, Thailand can, in our opinion, comfortably support a stronger currency.

If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.

Leave a Reply

Your email address will not be published. Required fields are marked *