Thailand’s baht has long out-muscled regional peers, but amid a stumbling economy, the central bank has pulled the plug on supporting the currency.
The Bank of Thailand (BOT) last week sent a triple whammy to the markets: In a surprise move, it cut its benchmark interest rate by 25 basis-points to 1.5 percent. In its statement, the BOT mentioned its concerns about the continued strength of the baht. That was followed up with the easing of some of the country’s capital controls, which will allow more funds to flow out of the country.
“All three things marked a strong message,” said Santitarn Sathirathai, an analyst at Credit Suisse, noting it’s rare for the BOT to mention the currency level. “If there is appreciation in the baht again, which could happen due to the current account surplus, then the Bank of Thailand could intervene to cap appreciation and to cap outperformance over regional currencies.”
“It’s a paradigm shift,” he added.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.