Thai baht soars against US dollar
The volatile Thai baht made a fierce comeback against the weakening US dollar, soaring to 35.93 against the greenback over the weekend. Just a few weeks ago, the baht depreciated to 38.35 against the dollar.
At the end of September, the Thai baht plunged to 38 against the US dollar for the first time in 16 years amid aggressive interest rate hikes from the US Federal Reserve System (Fed) intended to combat inflation in America. In the weeks to follow, the baht plummeted even further against the dollar.
On October 19, one dollar was valued at 38.31 baht. By November 12, the dollar equated to 35.93 baht. In just three weeks, the dollar fell 6.2% in value against the baht.
The Thai baht has surged amid a boom in Thailand’s economy with both consumer and industry confidence on the rise. Thai consumer confidence rose for the fifth month in a row in October, reaching a 10-month high.
The strengthening of Thailand’s baht is in line with regional currencies as investors predict that the Fed will relax their interest rate hikes.
Inflation in Thailand is among the lowest in the world, ranking 107 of 130 countries – far ahead of “developed” economies like the UK, the US, and Germany which are facing high levels of inflation in the current economy.
However, the baht’s strength against the dollar could be short-lived if the Fed ramps up interest rates again, which they could. The baht could also quickly depreciate if there is a drop in gold prices in Thailand.
Foreign funds have been flowing out of the Stock Exchange of Thailand as it neared its resistance level last week while Thai bond yields fell last week, according to Krungthai Bank Market Strategist Poon Panichpibool.
Despite the baht’s promising upward trend, the Bank of Thailand warns the country’s importers and exporters to adopt hedging measures in preparation for more volatility in the currency market.
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