Baht’s sudden drop shows battle lines drawn

BANGKOK: The battle over the Thai baht intensified in the new year, with the currency suddenly dropping even before domestic markets opened.

The baht plunged as much as 1.8%, the biggest decline since 2007, to 30.226 against the dollar in early Asia trading. That wiped out the gains made earlier this week when it had surged to a 2013 high.

“It’s likely to be central bank intervention given that the central bank has mentioned that they’ll be fighting against baht strength,” said Mingze Wu, a foreign-exchange trader at INTL FCStone in Singapore. It may also have been due to dollar-baht bears overextending their positions, he said.

Thailand’s currency appreciated almost 9% in 2019 despite a litany of measures undertaken by the central bank to keep it in check. Authorities have cut interest rates to a record low, reduced the supply of short-term bonds and eased rules on outflows.

The baht had jumped as much as 0.9% to surpass 30 per dollar on Monday, prompting a statement from the central bank playing down the surge. It said an imbalance in demand and low market liquidity had impacted the currency.

Calls to the office of Mathee Supapongse, the deputy governor, outside of normal working hours weren’t answered.

With no scheduled central bank decision due before Feb 5, policy makers may announce an off-cycle meeting or unveil further easing measures to stem the baht’s gains, according to some analysts, though Thailand’s large current-account surplus and foreign reserves are likely to remain an encumbrance.