Thai Finance Minister Dismisses Gold Trading as Baht's Main Strength Driver
Ekniti Nitithanprapas names current account surplus, bond inflows, and interest rate differential as true causes; vows MoF and BOT will curb speculation
- Thailand's Finance Minister stated that gold exports are not the principal reason for the baht's recent strength, describing their financial impact as negligible.
- The minister identified the actual main drivers of the baht's appreciation as a large current account surplus, capital inflows into the bond market, and a favorable interest rate differential.
- He justified this by explaining that the value of the gold trade, around $200 million, is marginal when compared to the total volume of capital flowing into the country.
Thailand's Deputy Prime Minister and Finance Minister, Ekniti Nitithanprapas, has played down the impact of gold exports, stating they are not the principal reason behind the recent appreciation of the Thai baht.
The Minister pointed out that the value of the gold trade is negligible when measured against the total volume of capital flows entering the country.
Ekniti pinpointed three major channels responsible for the baht’s strength during its peak period:
A substantial current account surplus: This arose because exporters rapidly increased shipments during the first half of the year, leading to a massive influx of U.S. dollars that were then sold for baht.
Capital inflows, particularly into the bond market: Large volumes of foreign capital flowed into Thai bonds, requiring investors to sell dollars and purchase baht for these investments.
The interest rate differential: This gap between Thai and foreign interest rates incentivised capital movement towards the baht.
However, the Minister noted that the baht’s trajectory has now begun to soften because the U.S. Federal Reserve (the Fed) recently cut interest rates.
Speaking on Wednesday, Ekniti confirmed that the Ministry of Finance (MoF) and the Bank of Thailand (BOT) will work in concert to manage the currency and prevent undue speculation and excessive volatility.
Discussing his previous consultations with the Bank of Thailand Governor, Vitai Ratanakorn, Ekniti emphasised the need for accurate diagnosis.
"What we must constantly stress is correctly analysing where the baht's strength originates, so we can scratch where it truly itches," Ekniti remarked.
He reiterated the key principle agreed upon with the BOT Governor: preventing excessive speculation and ensuring the currency’s movement remains aligned with economic fundamentals.
The Minister elaborated on the analysis carried out by the joint financial teams: "Analysis by both the Bank of Thailand and the Fiscal Policy Office (FPO) shows that the funds linked to gold exports to neighbouring nations, such as Cambodia, do have some effect on the currency."
He dismissed highly publicised figures, adding: "While reports suggested a value of approximately 6 billion baht to 7 billion baht, the U.S. dollar equivalent is only around $200 million [approximate figure]. This figure is marginal when compared to the entirety of the capital flow entering the country. Therefore, gold exports are not likely to be the cause of the strong baht."
