What’s behind the rapid weakening of the baht after Trump election
Close ties with China and link to gold primary reasons, says FTI, as currency hits 3-month low
Thailand’s close relationship with China and the fact that the baht’s value is tied to the gold market are the two factors behind the volatility of the currency compared to other currencies in the region, Kriengkrai Thiennukul, president of the Federation of Thai Industries (FTI) said on Friday.
He was explaining the baht’s steep fall from 33.713 baht to the US dollar on November 4 to 35.09 on November 14, the weakest in three months, and in sharp contrast to the fast appreciation recorded in September.
“Almost all currencies weakened against the dollar after Republican candidate Donald Trump won the US presidential election, but Thai currency tends to fluctuate more than that of neighbouring countries,” he said.
Kriengkrai said that the US under Trump’s presidency might implement a reshoring policy, inviting American companies operating overseas to return to the country, create jobs and drive its economy under the “Make America Great Again” policy.
“The US is also likely to heighten trade barriers, especially against China, resulting in the Chinese yuan and the baht weakening further, as Thailand and China have maintained a close relationship in both diplomatic and economic aspects,” he said.
Kriengkrai said another factor behind the baht’s strong fluctuation is the gold market, to which the Thai currency is tied. Since gold price is constantly volatile, it can amplify the rise and fall of the baht significantly, he said.
An FTI survey of 1,365 business operators in October found that 50.4% of respondents were concerned about the fluctuations in the exchange rate, which could undermine the competitiveness of Thai exports.
Other concerns include the rising cost of living and high household debt, the influx of cheap imports, and the impact of flooding in several provinces that have driven up the prices of agricultural products and construction materials.
