Thai central bank girds for New Year battle with baht strength

[SINGAPORE] Trading in the Thai baht is set to restart after the holiday break with the central bank facing a fresh battle to contain the currency's strength.

The baht jumped as much as 0.9 per cent to surpass 30 per US dollar on Monday for the first time since 2013. Although the central bank played down the surge the following day, with some traders attributing the move to stop-loss orders amid thin year-end liquidity, policy makers will remain watchful.

Thailand's currency appreciated almost 9 per cent in 2019 despite a litany of measures undertaken by the central bank to keep it in check. Authorities have cut interest rates to a record low, reduced the supply of short-term bonds and eased rules on outflows.

The market doesn't appear to be wholly on the side of the central bank. The median forecast of 18 analysts surveyed by Bloomberg from Nov 27 to Dec 24 is for the baht to end the first quarter at 30.2 per US dollar, although eight of those polled expect it finish the period at 30 or lower.

With no scheduled central bank decision due before Feb 5, policy makers may announce an off-cycle meeting or unveil further easing measures to stem the baht's gains, according to some analysts, though Thailand's large current-account surplus and foreign reserves are likely to remain an encumbrance.

BLOOMBERG