Thailand: BoT ready to curb recent baht strength

  • The Bank of Thailand (BoT) has expressed concern about a recent rapid appreciation in the Thai baht, adding that it remains ready to take steps to curb a climb that could imperil an already fragile economy.
  • The baht’s near 2% rise against the USD in the past month [May 20] is among the steepest in Asia, aided by dwindling Thai coronavirus cases, an easing national lockdown and a shallower-than-expected 1Q20 economic contraction.
  • This backdrop may attract short-term capital flows, and its performance may be out of line with economic fundamentals, the central bank said in a 1 Jun 20 statement.
  • Deputy governor Mathee Supapongse said that the BoT will also scrutinise gold trading as that may have contributed to the currency’s performance.
  • Thailand’s economy relies on tourism and trade, both of which have been badly damaged by the novel coronavirus pandemic. Officials sensitive to currency strength that could hamper competitiveness. The government has started loosening a lockdown, though incoming flights are still banned for the tourism-dependent economy.
  • Irene Cheung, foreign exchange strategist at Australia and New Zealand Banking Group. She sees the baht weakening to 33.50 to the USD by end-Jun 20.
  • The baht’s rally may also face headwinds from technical factors. The currency breached resistance around 32.00 to the USD, but further gains have been limited by its 100-day moving average.

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