Since the start of 2021, major currencies and Asian currencies, including the Chinese Yuan, have continued to strengthen while the greenback has been facing sell-off, pressured by the Fed's quantitative easing and the US presidential transition. Meanwhile, the Thai Baht's value has surged past the 30-per-Dollar mark; therefore the Baht's appreciation is an issue that warrants close attention and the Bank of Thailand (BOT) has pressed ahead with the relaxation of related regulations further in a bid to adjust balance in the foreign exchange market ecosystem.
The latest measures include: 1. Allowing greater flexibility for non-resident qualified companies (NRQC) to conduct foreign exchange transactions against the Thai Baht; and 2. Reducing the outstanding balance that domestic financial institutions can provide Thai Baht liquidity to non-residents (NR) in the case of transaction undertaken without underlyings. KResearch is of the view that the two actions will likely help reduce offshore Thai Baht transactions.
We also view that the BOT's measures over the past several years reflect its efforts to maintain the Baht's stability in many aspects. However, it may take a while for its measures and actions to become effective in stabilizing the Thai currency and reducing the overall volatility in the foreign exchange market. Meanwhile, an immediate challenge for the Thai export sector over the short term is to brace for the Baht's appreciation during the remainder of 2021 while the Thai business sector must make quick adjustments, enhance its productivity and cost management in order to maintain profit margins and bolster long-term competitiveness.