THB exchange rate reached a 6-year high in Asia

Thai Baht has strong performance against US Dollar in forex market, reaching a highest level of 1:30.315 since June 2013. This year THB/USD exchange rate has increased by 7%, becoming the best performer in Asia.

Compared with South-Korean Won and Chinese Yuan heavily influenced by the Sino-US trade war, the uptrend of strong Thai Baht is expected to continue due to two reasons: firstly, Thai Baht is the preferred safe-haven currency in Asia. and it was not influenced heavily during the tense period of Sino-US trade war. Among the eight major currencies in Asia, Baht is the second currency least affected by Chinese Yuan; secondly, Thailand has stable society and economy.

With the Thai government‘s ongoing efforts in recent years to introduce advanced technologies, issue favorable polices, step-up urban planing and boost tourism, the country has seen its cities thrive and economy soars, while the number of tourists totaled 38 million in 2018. Thailand’s Treasury Department estimates the country to achieve a 4.2%-4.3% annual growth, with 5% growth in exports, indicating that the country is steadily becoming a major economy of Southeast Asia. The International Monetary Fund (IMF) has ranked Thailand as the ASEAN economy with the second-largest GDP, right after the Champion Indonesia and followed by Malaysia.

From 2017 to 2018, the number of tourists coming to Thailand increased by 7.54% to nearly 40 million. Besides being a global tourist attraction, the country is also becoming a great investment destination for foreign investors.

As China deepens the Belt and Road Initiative, Thailand actively responds by launching the “Eastern Economic Corridor (EEC)” strategic project, which holds tremendous promise for the country‘s development. Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations, notes that the EEC project as well as Thailand’s upcoming election will benefit the countrys economy overall, and with an influx of foreign capital, the Baht is expected to rise over a relatively long period.

Thailand‘s Minister of Finance Uttama Savanayana recently said the central bank will make sure the Baht’s trend is in line with the countrys fundamental economic indicators, as the currency continues to rise against US dollar. The central bank kept the benchmark interest rate unchanged in September after cutting it by 1.5% in August.

The surge of the Baht has been quite a headache for Thailands economy recently. The government has released financial stimulus worth of US$ 10 billion in order to stabilize the economy against the rising Baht.

The Bank of Thailand thinks that the country‘s economy is becoming more sensitive to Baht’s appreciation in the context of weakening export-related sectors, like manufacturing and service industry, as this can post even greater stress on domestic demand. The central banks committee notes the need to closely observe the exchange rate, capital flow and the possible implication on economy, saying that further approaches may be taken when necessary.

If the Baht continues to go up, it‘s going to post serious challenges to Thailand’s tourism, which is crucial for the country‘s economic growth. Thailand’s growth in the last quarter slowed down to 2.3%, partly due to the recession in the travel industry. Exports of electronic components has also been hit by the Bahts surge, as SET Index of electronic components has been down by 23% year to date.