Baht at strongest level against greenback since May 2013
BANGKOK: The Thai baht advanced as much as 0.3% on Friday to 30.187 per dollar, the strongest level since May 2013. That takes its gain to 7.8% this year, more than any of its emerging-market peers except Russia’s ruble.
The gains have defied the efforts of Thai authorities, who fear the baht’s strength is becoming a drag on the Us$505bil economy.
Finance Minister Uttama Savanayana said on Oct 9 that the central bank should “take care” of the currency.
Why is the baht so strong? Several factors are attracting investors to Thailand, making it a haven for foreign money.
But its healthy current account tops them all, according to analysts at Goldman Sachs Group Inc. The International Monetary Fund forecasts the country will post a surplus of 6% of gross domestic product this year, almost double that of Japan.
Thailand’s reserves and negligible inflation also provide investors comfort. The central bank’s foreign-cash pile stands at Us$220bil, the equivalent of more than 12 months of imports.
And inflation, currently 0.3%, has been running below the central bank’s target of 1% to 4% since June.
Thailand is also getting a boost from gold. A hub for bullion trading, Thailand has benefited as jitters about the Us-china trade war and global economic slowdown have driven a 17% gain in the price of the metal this year.
Why is the baht’s strength a worry? When currencies strengthen, exporters suffer.
The country’s tourism industry, which accounts for about 20% of GDP, is also hurting.
The Tourism Council of Thailand last month revised down its estimate for visitor numbers this year to fewer than 40 million, citing the baht as the biggest reason.