The baht has made its biggest decline since 2007, to 30.226 against the dollar in early Asia trading. The baht plunged as much as 1.8% on Thursday. Almost erasing all the gains it made in the past three sessions.
The currency appreciated almost 9% in 2019, the best performer in Asia. Thailand’s large current-account surplus lured investors seeking haven assets during an intensifying US-China trade war. Authorities have battled markets to keep gains in check. Above all taking measures including interest-rate cuts and easing rules on outflows.
Liquidity in the currency market is normalizing even as the baht remains volatile, Bank of Thailand assistant governor Vachira Arromdee said on Thursday. There still remains sharp fluctuations in the baht as the market adjusts, she said.
New Measures to Curb the Baht
The central bank remains concerned about the baht’s appreciation and is ready to consider additional measures, according to minutes of its Dec 18 rate meeting released on Thursday.
The government also weighed in, with Prime Minister Prayut Chan-o-cha saying on Thursday that the need for new currency measures is being considered. A joint commission between the central bank and the finance ministry has also been formed to tackle the issue, Gen Prayut added.
The baht had jumped as much as 0.9% to breach 30 per dollar on Monday. Above all prompting a statement from the central bank playing down the surge. It said an imbalance in demand and low market liquidity during the holidays had impacted the currency.
The country’s reserves and current-account surplus are key factors luring investors to the baht. The central bank’s foreign-cash pile stands at $222 billion. While Thailand’s current-account surplus was $3.38 billion in November.
Policy makers need to encourage overseas investments by local investors to trim the current-account surplus, said Stephen Innes, chief Asia market strategist at AxiTrader in Bangkok. Domestic investors’ risk bias is to stay at home and the barrier to change that behavior is “massive,” he said.