Thai Baht Surges To Four-Year High Ahead Of BOT Rate Decision

The Thai baht climbed to the highest in more than four years, heaping pressure on the central bank to stem the rally ahead of its policy decision this week.

The Bank of Thailand tightened gold traders' foreign exchange forward transactions on Monday after the currency edged higher to 31.523 per dollar, holding at the strongest since June 2021. The baht has advanced more than 8% this year, making it the second best performer in Asia amid record gold prices and a weaker greenback.

The currency's persistent strength is putting pressure on the BOT to signal further easing at its meeting on Wednesday as the nation's exporters feel the added pinch from new US tariffs. While officials have managed to weaken gold's influence on the baht, the current peak tourism season is giving the currency fresh tailwinds.

"We see the excessive baht strength as unwelcome given sluggish growth, disinflation, and political uncertainty," Wee Khoon Chong, a senior strategist at BNY, wrote in a note to clients. "Baht strength is one reason we still see easing risk in 2026."

The baht's rally may lose some steam as an ongoing border clash between Thailand and Cambodia undermines investor confidence. Political risk is also set to weigh ahead of an election to be held as early as January.

The baht is likely to continue to benefit from a softer US dollar environment and positive fourth quarter seasonality, Barclays Bank Plc strategists including Audrey Ong wrote in a note to clients. That said, "baht political risk premium could build into the new year should it take time to form the new government."

Source: Bloomberg Europe