Thai Baht Nears Four-Year Peak

The Thai baht traded around 31 per dollar in mid-February, hovering near its highest level since March 2021, as market sentiment was bolstered by the Bhumjaithai Party’s election victory. Investors see Anutin’s decisive win as potentially ending Thailand’s prolonged period of fragile coalition governments, which had weighed on economic growth and caused local markets to lag regional peers. The party has pledged to streamline regulations to attract foreign investment, maintain targeted consumer subsidies, and uphold fiscal discipline by narrowing the budget deficit. The result also lifted prospects for political stability, after the country experienced three prime ministers in as many years. In the three days following the election, the baht outperformed other regional currencies, supported in part by gold’s rise this year, a key factor in Thailand, where strong household holdings give the metal significant influence on local assets.

The Thai baht rose 1.3% to 31.2 per dollar on Monday, rebounding from losses last week and hitting a more than one-week high, as market sentiment improved following the Bhumjaithai Party’s decisive election victory. Thailand’s ruling conservative party, the Bhumjaithai Party, secured its first victory of the century and is set to win 191 of the 500 seats in the House of Representatives, nearly triple its 2023 tally. The outcome has boosted market confidence, as a strong showing for Prime Minister Anutin Charnvirakul and likely coalition partners reduces the risk of political deadlock or instability. In addition, the latest results pave the way for policy continuity, including the continuation of the party’s social handouts and the approval of a new budget. Meanwhile, the pro-democracy People’s Party, which had led in pre-election surveys, is on track to capture 115 seats.

The Thai baht weakened to 31.88 per dollar on Thursday but was still up about 8% this year, the second-best performer in Asia after the Taiwan dollar. Its rapid appreciation has raised concerns for exports and tourism, key pillars of Thailand’s economy. Incoming Finance Minister Ekniti Nitithanprapas said the government will work with the Bank of Thailand to manage the local currency after it hit a four-year high, noting that capital inflows and gold trading will be monitored for irregularities. He added he had discussed stabilization with Vitai Ratanakorn, who will become central bank governor on October 1. Ekniti also flagged potential probes into unusual flows, while Deputy Minister Vorapak Tanyawong warned the baht could climb further on foreign demand for bonds and equities. Earlier this week, the central bank said it may introduce a tax on gold trading. From January to July, Thailand’s gold exports surged 82% to USD 7.6 billion, including USD 2.1 billion to Cambodia.