(Bloomberg) -- Thailand’s exporters are “severely hurt” by a blistering rally in the baht in recent weeks that has made their products less competitive with shippers unable to effectively hedge currency risks, according to a business group.
The only way to limit the damage to the economy is for the Bank of Thailand and the Ministry of Finance to take steps to temper the currency rally and curb its volatility, Poj Aramwattananon, vice chairman of the Thai Chamber of Commerce, told reporters in Bangkok Monday.
The baht has jumped about 11% since the end of June as the dollar weakened in anticipation of US Federal Reserve’s rate cuts and foreign funds poured money into the Southeast Asian nation’s bonds and stocks. That has prompted calls for the central bank to intervene and also to cut the rate to shield exports and tourism — two pillars of Thailand’s $500 billion economy.
If the currency gain is left unchecked, it will hurt exporters’ revenue and foreign tourist spending next quarter and through early 2025, Poj said. Exporters reliant on more local content for their products are the worst-hit, he said.
“If the situation goes on like this, it will deal a blow to the economy in the fourth quarter and the impact will drag on into early next year,” Poj said. “The baht’s rally this time has severely hurt exporters. The fast swing makes it difficult for exporters to hedge.”
The BOT has said that baht gains have been fueled by external factors such as dollar weakness and a spike in gold prices. Governor Sethaput Suthiwartnarueput said on Friday that the central bank is closely monitoring the currency and it doesn’t want to see large swings in the exchange rate.
The baht’s 3-month implied volatility against the dollar is at 9.18%, near its highest since January and more than the average 7.98% this year, according to data compiled by Bloomberg. The baht traded little changed at 32.94 against the dollar on Monday, near its highest level since Feb. 2023.
The local currency should be stable at about 34 to a dollar, Thai Chamber of Commerce Chairman Sanan Angubolkul said at the same briefing.
Rice Exports
Among the most affected by the baht rally are the country’s rice exporters, who are losing out to suppliers from Vietnam, India and Pakistan, said Korbsook Iamsuri, the head of the Thai Rice Exporters Association.
The situation could worsen next year when India fully resumes rice shipments, Korbsook said, flagging potential domestic glut that would hit prices.
Chamber executives plan to meet with Sethaput and Finance Minister Pichai Chunhavajira to discuss the high debt burden of consumers and businesses as well as ways to spur growth, the chairman said. The group wants lower interest rate to ease cost of business, urging monetary and fiscal policymakers to jointly come up with the best solution for the economy.
The BOT’s Monetary Policy Committee has kept the key rate steady at 2.5% since the fourth quarter of 2023 even as inflation stayed below the 1%-3% target.
Sethaput reiterated on Friday that Thailand’s monetary policy would be guided by the outlook for domestic economic and financial conditions and inflation, and won’t be swayed much by the US Feds’ interest rate moves.
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