The Thai baht took a final sprint into the new year, leaving authorities with a fresh conundrum when markets reopen in 2020.
The currency jumped as much as 0.9% to surpass 30 per dollar on Monday for the first time since 2013, with traders speculating the move was caused by stop-loss orders amid thin year-end liquidity. The epicentre of the Asian financial crisis more than two decades ago, Thailand’s large current-account surplus and foreign-exchange reserves have turned the baht into one of the best performers in emerging markets this year.
The currency has climbed more than 8% against the dollar in the past 12 months, hurting exports and tourism and putting the economy on course for the slowest annual growth in five years. At the same time, Thailand’s policy makers have been reluctant to step into the foreign-exchange market for fear of being branded a currency manipulator by the US
“They’re stuck between the proverbial rock and a hard place,” said Stephen Innes, chief Asia market strategist at AxiTrader in Bangkok. “They need a weaker currency to increase exports and attract tourists.”
The Bank of Thailand is closely monitoring the baht’s exchange rate to ensure its movement is in line with fundamentals, according to a statement on Tuesday. An imbalance in demand for the baht and low market liquidity during the holidays has impacted the currency, according to Deputy Governor Mathee Supapongse.
“The baht’s volatility will be much lower after the long holidays pass,” said Mathee. “The liquidity and trading transactions will return to normal levels.”
The baht traded at 29.927 per dollar at the close on Monday.
Markets are shut in the nation on Tuesday and Wednesday for the New Year holidays.
Thailand’s current-account surplus widened to $3.38bn in November, more than the $2.9bn that economists had predicted.
The currency had been testing levels around 30.14 to 30.15 recently, and a breach of that range may have triggered some stop losses, said Roong Sanguanruang, a market analyst at Bank of Ayudhya Pcl in Bangkok.
“Given the thin liquidity in the market at this time, I think it would take not a very big amount to take the market down,” the analyst said.
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