Thai baht strengthens 2.2% against regional currencies, Bank of Thailand tightens scrutiny on dollar transactions

The Thai baht has appreciated by 2.2% against regional currencies from December 1-16, 2025, outperforming other currencies such as the Malaysian ringgit (1.1%), Japanese yen (0.9%), and Singapore dollar (0.5%). This has raised concerns over the rapid strengthening of the baht, prompting the Bank of Thailand (BOT) to step up scrutiny of dollar transactions, particularly in the gold trading sector.

BOT Governor Vitai Ratanakorn explained that the baht’s rise in December was largely driven by the weakening of the US dollar, with additional pressure coming from domestic factors such as seasonal inflows linked to tourism, exports, and investments in stocks and bonds. A significant increase in dollar sales by gold traders to buy baht has also contributed to the rise.

The BOT is now monitoring these foreign exchange transactions closely, particularly in the gold sector, where the volume of dollar sales to buy baht has surged. It has instructed commercial banks to strictly check the documentation for foreign exchange transactions related to gold trading. Furthermore, the BOT is working with the Ministry of Finance to issue regulations that would grant the BOT the authority to request information about foreign exchange transactions from large gold traders.

The BOT also plans to tighten supervision of gold trading, particularly regarding online platforms where large transactions occur, to prevent volatility in the baht’s value. Additionally, it will examine transactions involving the sale of foreign currency for baht to prevent undesirable capital inflows not related to normal business operations or individual money transfers. Commercial banks are being instructed to closely monitor these inflows to ensure compliance.

Investors urged to adapt amid regional currency shifts

Pipat Leungnamritchai, chief economist at Kiatnakin Phatra Bank, explained that the baht's strength is affecting Thailand’s competitiveness, particularly in goods, tourism, and other sectors. While the strength partly comes from external factors, such as the weakening US dollar following the US Federal Reserve's rate cuts, the baht remains stronger compared to regional currencies, which raises concerns.

He noted that the baht has hit a multi-year high against currencies like the Japanese yen, making Thailand appear "more expensive" in the eyes of foreign visitors and investors. When compared to countries like Vietnam, Japan, or South Korea, Thailand's higher costs may impact both its exports and tourism.

The currency’s appreciation also affects investments, particularly for those investing abroad, as a stronger baht could lead to losses from foreign currency transactions.

Amornthep Chawla, head of research at CIMB Thai Bank (CIMBT), shared similar concerns. He highlighted that the recent appreciation of the baht against the dollar directly affects Thailand’s competitiveness, particularly in exports and tourism. While the baht’s strength is partly due to the dollar’s weakness, he stressed that the issue is more significant when compared to other regional currencies, making Thailand less competitive structurally.

Looking ahead, Amornthep said the baht is likely to continue strengthening, not driven by domestic economic growth, but by Thailand’s high current account surplus. Despite potential export slowdowns in 2026, due to trade wars and preemptive US imports, Thailand's sluggish economic growth could lead to even lower import demand.

The strong baht also receives structural support from gold exports, as Thailand is a net exporter of gold. Rising gold prices lead to increased exports, bringing in US dollars and further strengthening the baht.

While gold transaction controls could protect consumers and prevent money laundering, the strong baht cannot be solved solely through gold market mechanisms. Long-term solutions require balancing capital flows without relying solely on interest rate policies.

Amornthep suggested Thailand should encourage more outbound investment, making it easier for Thai individuals to invest abroad, including in foreign stocks or bonds. With higher interest rates in other countries, this could provide Thai investors with better returns, especially in times of a stronger baht. He also recommended allowing investors to take on more risk without fully hedging, providing opportunities to profit from foreign markets.

Thai baht to strengthen until mid-2026

Yanyong Thaicharoen, Chief Executive Officer of Economic Research and Sustainability at Siam Commercial Bank, said that Thailand's currency advantage has now diminished, and the strong baht could affect the country's competitiveness.

In the short term, the baht may continue to strengthen against regional currencies and trade partners from late 2025 through Q1 2026. This could be due to interest rate cuts by both the Monetary Policy Committee (MPC) and the US Federal Reserve (Fed), as well as gold prices, which continue to support the baht’s appreciation.

However, by mid-2026, the baht may depreciate slightly as the US interest rate cycle declines and investors start shifting their funds back. Despite this, the real effective exchange rate (REER) shows that the baht remains stronger than other regional currencies.

The strong baht is affecting Thailand’s agricultural exports, which rely heavily on domestic production and labour, leading to significant impacts. In contrast, electronics, which depend largely on imported raw materials, may benefit from lower import costs.

The tourism sector may also face challenges, especially in comparison with Vietnam, as tourism markets are highly competitive in terms of prices. If the Thai baht strengthens while the Vietnamese dong weakens, the currency gap will widen, potentially affecting tourists' decisions.

"If the baht weakens, it could help absorb some of the economic challenges domestically, supporting exports and tourism. However, the current trend of a strengthening baht may exacerbate problems instead of improving the situation," Yanyong concluded.