Bangkok: The Bank of Thailand (BOT) highlights that the increase in gold prices is contributing to the strengthening of the baht and is actively engaging with businesses to ease the resulting pressure. The BOT has observed that the recent appreciation of the baht is influenced by not just the declining US dollar but also a significant rise in gold prices exceeding 40%. This surge has triggered a sell-off of gold abroad, leading to the conversion of dollars back into baht and causing the baht to strengthen more than other regional currencies.

According to Thai News Agency, Ms. Pawinee Jitmongkolsamer, Senior Director of the Financial Markets Department at the Bank of Thailand, stated that the baht’s recent appreciation is attributed to a mix of domestic and international factors. The US dollar’s nearly 10% weakening, driven by the Federal Reserve’s accommodative monetary policy, is one factor. Domestically, better-than-expected economic data and increased political confidence have also played a role. Additionally, the significant rise in gold prices has prompted gold shops to sell gold abroad and convert dollars back into baht, further strengthening the currency.

The BOT notes that the relationship between gold prices and the baht is highly volatile, with fluctuations in gold prices directly impacting the baht’s value, making it more unstable compared to other regional currencies. To address this, the BOT is planning another meeting with gold shop operators next week to assess progress on collaborative measures aimed at mitigating the baht’s pressure from gold trading.

Ms. Chayawadee Chaianan, Assistant Governor for Corporate Affairs and BOT spokesperson, mentioned that the BOT is contemplating additional measures, such as promoting direct gold trading in US dollars to minimize the conversion back into baht. Tax measures are also under consideration should the situation worsen. However, she stressed that any measures must be carefully evaluated for their impacts and potential side effects.