Baht falls from highest since 2022 on conflict with Cambodia
The local currency fell 0.3 per cent to 32.29 per US dollar on Thursday (Jul 24) after touching 32.11 earlier, the strongest since February 2022. Stocks slid about 1 per cent.
The baht had surged more than 6 per cent this year on growing optimism over trade negotiations, the return of foreign stock inflows and near-record high gold prices.
Thai fighter jets hit two Cambodian army posts near their disputed border on Thursday, as troops clashed in multiple locations in an escalation of tensions between the two nations.
'The escalating border conflict is giving investors a reason to book some gains after the Thai baht has appreciated,' said Lloyd Chan, currency strategist at MUFG Bank.
The conflict could put a pause in baht's rally this year. Sentiment was boosted earlier after Finance Minister Pichai Chunhavajira said on Tuesday the nation is close to an agreement with the US to lower a threatened 36 per cent tariff on its goods ahead of the Aug 1 deadline, and expects a rate closer in line with regional neighbours.
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The baht's gain is putting pressure on authorities to curb its strength to protect the nation's economic drivers of tourism and exports.
'Bank of Thailand will continue to watch for any excessive volatility,' said Christopher Wong, senior foreign-exchange strategist at OCBC in Singapore. A break of the resistance level at 32 to 32.1 baht per US dollar may add more tailwind to the currency, he said.
Thailand's foreign-exchange reserves climbed to a record US$263 billion earlier in July, partly as officials stepped up their intervention to slow the baht's appreciation.
Easing tensions between two of Thailand's largest trade partners – the US and China – are also soothing investor worries. Global funds have poured a net US$345 million into Thai equities in July, on track for the first monthly inflow in 10 months. On Wednesday alone, global funds poured in US$139 million into stocks, the largest single-day inflow in 10 months.
The baht is also underpinned by near-record high gold prices, given the country's status as a major trading hub for the precious metal in Asia. BLOOMBERG
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