The Thai National Shippers’ Council (TNSC) has expressed concern over the appreciation of the baht, which they believe may be driven by foreign capital inflows rather than the country’s actual economic conditions.
Dhanakorn Kasetrsuwan, Chairman of the TNSC, noted that foreign currency, particularly the US dollar, along with digital assets, could be flowing into Thailand and converted into baht to purchase liquid assets like gold. Thailand’s robust gold market and its trading system connected globally enable faster transactions compared to some neighboring countries.
Given the increased volatility in global financial markets, gold is often viewed as a safe asset. The TNSC worries that short-term capital inflows may lead to a surge in baht purchases, pushing the currency to appreciate faster than justified by economic fundamentals such as production and exports.
A stronger baht, stemming from capital flows disconnected from real economic activity, presents challenges for exporters, especially small and medium-sized enterprises that depend on competitive pricing and cannot swiftly adapt their orders in response to currency shifts. Mr. Dhanakorn emphasized that while costs for exporters are rising, they are not benefiting from these capital inflows.
To mitigate these risks, the TNSC urged the government and relevant agencies to monitor capital inflows carefully, especially short-term funds not related to investment or trade activities. They also recommended coordination among authorities such as the Bank of Thailand and regulators overseeing financial and gold markets to assess the impact of these inflows on the baht.
The objective is to prevent abrupt currency appreciation driven by external factors that are unrelated to the real economy, thereby protecting exporters from undue burdens. The Council also emphasized the importance of considering the broader implications of capital movements on exchange rates.
Mr. Dhanakorn pointed out that exporters are already facing difficulties, and allowing the baht to strengthen based on unrelated factors could further diminish Thailand’s competitiveness. The TNSC suggested maintaining an exchange rate of around 33-34 baht per US dollar to aid exporters in managing pricing and costs while staying competitive in the region.
He added that stability and predictability in the currency are more critical than targeting a specific exchange rate.