The Thai baht surged to its highest level in more than four years, intensifying pressure on the Bank of Thailand (BOT) ahead of its policy meeting this week. On Monday, the central bank tightened gold traders' foreign-exchange forward transactions after the currency climbed to 31.523 per US dollar, the strongest level since June 2021.
The baht has risen by more than 8% this year, making it the second-best-performing currency in Asia. Analysts attribute the strength to record gold prices, a weaker greenback, and tailwinds from the peak tourism season. However, persistent baht appreciation is raising concerns for exporters, especially as new US tariffs take effect.
"We see the excessive baht strength as unwelcome given sluggish growth, disinflation, and political uncertainty," Wee Khoon Chong, senior strategist at BNY, said in a note to clients. "Baht strength is one reason we still see easing risk in 2026."
The rally may face headwinds from an ongoing border clash between Thailand and Cambodia, which could dent investor confidence. Political risk is also set to rise ahead of an election that could take place as early as January.
Barclays Bank strategists, including Audrey Ong, noted that the baht is likely to benefit from a softer US dollar environment and strong fourth-quarter seasonality. They added a caveat: "Baht political risk premium could build into the new year should it take time to form the new government."
Bloomberg
