The Thai baht surged to its highest point in over two years, driven by global risk asset rallies following China’s recent stimulus measures. The currency appreciated as much as 0.8% against the US dollar, reaching 32.56 on Wednesday, a level last seen in March 2022. This robust appreciation, bolstered by significant foreign inflows into Thailand’s equities and bonds, has heightened concerns among exporters and placed additional pressure on the Bank of Thailand (BOT) to intervene.
Strong foreign investments, particularly in equities and bonds, have contributed to the baht’s recent rise. Thailand’s benchmark stock index is nearing a one-year high, further boosting investor sentiment. However, the currency’s appreciation poses challenges for Thailand’s $500 billion economy, which heavily relies on exports and tourism. The baht’s rally, the most significant quarterly gain in over 25 years, risks undermining these key economic sectors, prompting calls for policy action.
Finance Minister Pichai Chunhavajira reiterated the need for lower interest rates to curb the baht’s strength and provide relief to Thailand’s struggling economy. Both Pichai and BOT Governor Sethaput Suthiwartnarueput are scheduled to meet next week to discuss potential measures, with the currency’s strength high on the agenda. The central bank’s next interest rate decision is slated for October.
“The issue of a strong baht is already front and center for policymakers,” noted Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “However, if the broader trend of a weak US dollar persists, any policy responses may be delayed or subdued. For now, they may adopt a wait-and-see approach, but swift action cannot be ruled out.”
The baht’s appreciation is part of a broader trend of Asian currency strength, with China’s stimulus measures further fueling gains. The baht’s rise follows only the Malaysian ringgit, which jumped 14% this quarter.
The Bank of Thailand is closely monitoring currency movements and is prepared to act against any abnormal fluctuations that could hurt businesses and the broader economy. In September alone, global funds injected more than $400 million into Thai bonds, marking the third consecutive month of net foreign inflows. Additionally, foreign investors bought nearly $1 billion in Thai equities during the month, marking the first net inflow in five months. Stocks received a further boost from the Thai government’s market revival initiatives, including a new fund subscription offer.
Opportunities for Investors:
For investors, the baht’s surge presents a dual opportunity. On one hand, the rising currency offers strong returns for foreign investors in Thai bonds and equities. On the other hand, those with exposure to Thailand’s export and tourism sectors should remain cautious, as a prolonged baht rally could dampen competitiveness in these industries.
The recent influx of global funds into Thai markets is indicative of strong foreign confidence, but policymakers must strike a balance between maintaining currency stability and sustaining growth in key economic sectors.
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