Since the start of 2021, major global and Asian currencies, including the Chinese Yuan, have continued to strengthen while the US dollar 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 level of THB30.00/USD; therefore, the Baht's appreciation is an issue that warrants close attention. The Bank of Thailand (BOT) has pressed ahead with the further relaxation of related regulations in a bid to adjust balance in the foreign exchange market ecosystem.
The BOT has opted for greater flexibility for non-resident qualified companies (NRQC) conducting foreign exchange transactions against the Thai Baht, and has reduced the outstanding balance of Thai Baht liquidity that domestic financial institutions can provide to non-residents (NR) in the case of transactions undertaken without underlying. KResearch views that the two actions will likely help reduce offshore Thai Baht transactions by approximately 61% in 2019.
KResearch views 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 to monitor and assess the effectiveness of its measures and actions 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 (the Baht is projected to move within a range of THB29.00-29.25/USD at the end of 2021), while the Thai business sector must make quick adjustments, as well as enhancing its productivity and cost management in order to maintain profit margins and bolster long-term competitiveness.
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