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
In August, the Thai baht leapfrogged the Korean won to become Asia’s best performing currency of the year.
With one week of August in the books, the baht had posted a year-to-date gain of nearly 8% against the dollar, buying $0.03 (USD/THB 33.28), putting it back at mid-2015 levels.
The baht had also been strong against the Japanese yen (THB/JPY 3.3), rising between April and August by nearly 5%.
Against the Philippine peso (THB/PHP 1.522), which can be considered a regional rival to the baht because the Philippines, like Thailand, is a source of cheap manufacturing for Western businesses and a popular holiday destination, the baht had appreciated 10% by early August. The baht stood close to a 10-year high against the peso.
In an acknowledgement of the baht’s rapid rise this year, the deputy governor of the Bank of Thailand said in July that Thai companies should consider hedging against future baht appreciation.
In August, Thailand’s finance minister said that the baht’s outperformance will be short-lived. The minister identified two multi-billion baht foreign investments in Thai companies as a contributing factor in baht appreciation.
In the second half of 2017, against the FX majors Thailand's currency will be vulnerable to renewed hawkishness from the world’s major central banks. As interest rates rise or are expected to rise in advanced economies such as the US, Canada and Europe, riskier currencies like the baht will become less attractive to investors.