Thai Baht Slips to 10-Month Low

The Thai baht fell to around 33 per dollar, reaching the lowest level in ten months as escalating geopolitical tensions in the Middle East weighed on market sentiment. The currency remains under pressure as the war between the US, Israel, and Iran enters its fourth week, with escalating tensions following strikes on Iranian infrastructure and a strong response from Tehran. President Donald Trump has issued a 48-hour ultimatum to reopen the waterway, warning of strikes if it is not met, while Iran has threatened to close the strait and escalate retaliation if attacks continue. Brent crude has surged more than 50% since the start of the conflict, increasing import costs and worsening Thailand’s terms of trade, which has placed downward pressure on the baht. The currency has fluctuated by about 9% year-to-date, reflecting heightened sensitivity to global risk sentiment and energy shocks.

The Thai baht edged higher to around 31 per dollar in late February, despite a surprise move by the Bank of Thailand to cut its interest rate. At its February 2026 meeting, the central bank reduced the policy rate by 25 bps to 1%, defying market expectations of a hold. It was the sixth reduction since October 2024, bringing the cumulative cut to 150 bps as authorities aim to support an economy weighed down by US tariff uncertainty, high household debt and a persistently strong baht. US President Donald Trump recently announced plans to set global tariffs at 15% after a Supreme Court ruling that invalidated his tariff policy, lower than the 19% rate applied to Thailand. Meanwhile, political developments have provided some investor relief. Prime Minister Anutin Charnvirakul’s Bhumjaithai Party is expected to lead a new coalition government by April, following solid results in a general election earlier this month. This outcome eased investor concerns about political instability.

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.