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Why the Thai baht is defying economic gravity

The Straits Times

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October 04, 2025

US tariffs and gold prices have aided baht's rise, but rally hurting exporters and tourism

On its current trajectory, the Thai baht is expected to record its biggest annual gain in six years against the US dollar, creating a headache for newly appointed Prime Minister Anutin Charnvirakul's government.

The rally has already pushed the baht to a four-year high against the US dollar in September - and at first glance, the surge is puzzling. Thailand's economy is far from stellar, weighed down by a 19 per cent US tariff, sluggish tourism, high household debt and, ironically, the strength of its own currency.

The currency has rallied some 5 per cent against the dollar since US President Donald Trump's so-called Liberation Day tariff announcement, outperforming most Southeast Asian peers, including the Singapore dollar and Indonesian rupiah.

WHY IS THE BAHT SO STRONG?

Thailand's currency began to strengthen against the US dollar in mid-2024, around the same time the government launched an economic stimulus plan, tourism rebounded, and traders started selling the dollar ahead of the US Federal Reserve's cycle of interest rate cuts.

Recent gains, however, are more reflective of the current weakness in the US dollar, spurred by concerns over Mr Trump's trade war and its pressure on the US economy. That, in turn, has prompted investors to dump US assets as questions arose over the dollar's traditional role as a reserve currency.

Mr Trump's tariffs have also, more directly, aided the baht's gains. Thailand's current account surplus - a measure of how much its exports and foreign income exceed what it sends overseas - had already reached US$13 billion (S$16.8 billion) as at August, well above the Bank of Thailand's full-year forecast of US$11 billion. Much of this was driven by stronger-than-expected exports, such as cars, shipped early in the year ahead of impending US tariffs.

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