The battle over the Thai baht intensified in the new year, with the currency suddenly dropping even before domestic markets opened this morning.
The baht plunged as much as 1.8% on Thursday, the biggest decline since 2007, to 30.226 against the dollar in early Asia trading. That wiped out the gains made earlier this week when it had surged to a 2013 high.
“It’s likely to be central bank intervention given that the central bank has mentioned that they’ll be fighting against baht strength,” said Mingze Wu, a foreign-exchange trader at INTL FCStone in Singapore. It may also have been due to dollar-baht bears overextending their positions, he said.
Thailand’s currency appreciated almost 9% in 2019, the best performer in Asia, as its large current-account surplus lured investors seeking haven assets during an intensifying U.S.-China trade war. Authorities have battled markets to keep gains in check, taking measures including rate cuts and easing rules on outflows.
Liquidity in the currency market is normalizing even as the baht remains volatile, Bank of Thailand Assistant Governor Vachira Arromdee said on Thursday. There still remains high fluctuations in the baht as the market is still adjusting to the buying and selling of dollars, she said.
The central bank remains concerned about the baht’s appreciation and is ready to consider additional measures, according to minutes of its Dec. 18 rate meeting released on Thursday.
The baht had jumped as much as 0.9% to surpass 30 per dollar on Monday, prompting a statement from the central bank playing down the surge. It said an imbalance in demand and low market liquidity during the holidays had impacted the currency.
