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Baht’s Biggest Gain in Year Tests Bank of Thailand Patience

Baht’s Biggest Gain in a Year Tests Bank of Thailand’s Patience

(Bloomberg) -- Thailand’s baht surged the most in a year, defying a selloff among emerging Asian currencies and testing the central bank’s patience after it warned of economic risks from continued appreciation.

The baht advanced as much as 1.1% against the dollar on Thursday, the most since June 2019. The Thai currency has breached its 200-day moving average resistance, a technical pattern that could encourage speculative inflows.

Baht’s Biggest Gain in Year Tests Bank of Thailand Patience

“The baht has strengthened below 31 on the back of a dovish Fed, and markets are also expecting a catch-up with other Asian currencies, such as the Indonesian rupiah,” said Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore. “Reports that Thailand is considering implementing the fourth stage of reopening on Friday has also buoyed baht sentiment, as it hints that the economy could be returning to normal relatively soon.”

At the start of June, the Bank of Thailand said expressed concerned about the baht’s recent and rapid appreciation and added it’s ready to take steps to curb a climb that could imperil an already fragile economy.

In a statement Thursday, the central bank said the baht is moving in line with regional currencies based on dollar weakness and capital inflows. Much of the influx is from Thai investors and funds repatriating overseas investments rather than from foreign investors, it said.

Thailand’s economy relies on tourism and trade, both of which have been badly damaged by the novel coronavirus pandemic. Officials expect an economic contraction of as much as 6% this year and are sensitive to currency strength that could hamper competitiveness.

The country’s Finance Minister Uttama Savanayana told reporters in Bangkok on Thursday that it’s the central bank’s job to make sure the baht isn’t an obstacle, adding the currency should move in line with the economic recovery.

The baht strengthened 0.7% to 30.933 as of 5:15 p.m. in Bangkok, climbing for the fifth straight day. Thai stocks struggled, ending Thursday down 1.6% at the close.

Thailand remains under a state of emergency until the end of June but is easing a lockdown after novel coronavirus cases dwindled. The government on Friday may approve the scrapping of most remaining curbs.

©2020 Bloomberg L.P.