Thai Baht General Info
The Thai baht is subdivided into 100 satang.
The baht is termed an ‘exotic’ currency, which means that there is far less participation in the market for baht than in the market for more established currencies, such as euros or U.S. dollars. For this reason, the price paid to change your money into or from baht (the price being equivalent to the market bid-ask spread) is far higher relative to the amount of money being changed than it would otherwise be.
Thailand’s central bank manage the baht’s value under a ‘managed float’ regime, which means that the bank will intervene at times in the foreign exchange market to reduce what it sees as excessive volatility in the currency and to maintain national competitiveness, i.e. the bank will at times weaken the currency to boost demand for Thailand’s exports.
As an exotic currency, the baht is considered riskier than currencies from major developed nations, which means that its value will fall against the FX majors (especially JPY, USD, CHF, GBP and EUR) during periods of economic uncertainty or when global geopolitical risk is elevated, or during bouts of high market volatility.
Historically, the baht’s lowest valuation against the US dollar came in January 1998 when USD/THB reached 55.50. Its all-time high occurred in July 1981 when USD/THB fell to just 20.36. Since 2005, USD/THB has traded between 28.56 and 42.19.
THB - Market View
The Thai baht has performed well against the US dollar throughout 2017. The currency has appreciated steadily and experienced only two meaningful pullbacks. At the end of May, with the USD/THB exchange rate in the low 34s, the baht had gained nearly 6% against the US currency since highs posted in December of last year.
The baht has benefitted from an improved outlook for emerging markets. As of late-May, there is a fairly significant rally underway in emerging market assets. The MSCI Emerging Markets Index has rallied more than 16% in 2017, easily outperforming the S&P 500 (+7.8%). In order for foreign investors to buy assets in emerging economies, including Thailand, they must first buy the local currency, and this buying drives the currencies higher.
Emerging markets will remain supported throughout the year according to a senior researcher at investment fund Ashmore.
In 2017, the Thai baht will be vulnerable to the threat of US protectionism.