Photo Credit: Bloomberg
The Thai baht has reached its highest level against the US dollar in over four years, increasing pressure on the Bank of Thailand to manage the rally ahead of this week’s policy meeting.
On Monday, the Bank of Thailand restricted gold traders’ foreign exchange forward transactions after the baht appreciated to 31.523 per dollar, its strongest point since June 2021. The currency has gained over 8% this year, making it the second-best performer in Asia amid rising gold prices and a weaker US dollar.
The sustained strength of the baht is prompting expectations of further easing measures during the central bank’s upcoming meeting, especially as Thai exporters face additional challenges from new US tariffs. While efforts have been made to reduce gold’s influence on the currency, the current high season for tourism is providing additional support to the baht.
“We view the excessive strength of the baht as unwelcome given sluggish growth, disinflation, and political uncertainties,” stated Wee Khoon Chong, a senior strategist at BNY. “The strength of the baht remains one factor that supports the potential for easing in 2026.”
However, the rally may slow down due to ongoing border tensions between Thailand and Cambodia, which undermine investor confidence. Political risks also loom, especially with the upcoming general election expected as early as January.
According to Barclays Bank strategists, including Audrey Ong, the baht could continue to benefit from a softer US dollar and seasonal positivity in the fourth quarter. Nevertheless, political risk premiums may rise into the new year if it takes longer to form a new government.