BOT affirms baht stability despite US-Iran market pressure
The Bank of Thailand says no special MPC meeting is needed as the baht moves steadily and Thailand’s external position remains strong.
- The Bank of Thailand (BOT) affirms the baht remains stable, experiencing only a slight weakening due to global market pressure from the US-Iran conflict.
- The baht has depreciated by 5.4%, a lower rate than many regional currencies, and has seen smaller capital outflows with signs of foreign investment returning.
- Thailand's strong external position, including high international reserves and a stable financial sector, is credited with helping absorb the volatility.
- Unlike Indonesia, which held an emergency meeting, the BOT sees no need for special monetary policy measures due to the baht's stability.
The Bank of Thailand (BOT) has affirmed that the baht situation and Thailand’s external position remain strong, even as pressure from the conflict between the United States and Iran has caused the baht to weaken slightly.
The currency is still moving with stability, unlike Indonesia, which called an emergency meeting to raise interest rates to curb the depreciation of the rupiah.
BOT confident baht remains stable
Chayawadee Chai-anant, assistant governor of the Corporate Relations Group and spokesperson for the Bank of Thailand (BOT), said that amid volatility in global financial markets and the conflict between the United States and Iran, the BOT saw no need to convene a special meeting of the Monetary Policy Committee (MPC), as Bank Indonesia had done earlier.
This was because, although the baht had weakened somewhat in line with global financial market trends, its movement remained stable, while Thailand’s external position was still strong enough to absorb volatility from external factors.
Indonesia faces heavy pressure from capital outflows
The BOT spokesperson said Indonesia’s decision to raise its policy interest rate at the recent special meeting was aimed chiefly at easing pressure on the rupiah, which had weakened rapidly.
Since the conflict between the United States and Iran broke out, the rupiah has weakened continuously by more than 8%, marking its steepest depreciation on record.
A key factor was foreign investors’ gradual sale of Indonesian assets in both the stock and bond markets, worth about US$3.9 billion in total.
In addition, investors were concerned about domestic economic stability, fiscal policy direction and the risk that the Indonesian stock market could be downgraded from emerging market to frontier market status.
Baht weakens less, fund flows begin returning to Thailand
For Thailand, the baht has weakened by about 5.4% since the conflict began, a level lower than in many countries in the region.
At the same time, foreign investor capital movements showed net selling of Thai assets of only about US$1.3 billion, while more recently, there have been signs of foreign capital returning, particularly to the long-term bond market and the Thai stock market.
Thai fundamentals remain strong and can absorb volatility
The BOT assessed that although global financial markets remained uncertain because of geopolitical factors and the direction of the world economy, Thailand’s external position, including international reserves, financial-sector stability and the current account balance, remained a key supporting factor in reducing the Thai economy’s vulnerability to external volatility.
Consequently, Thailand’s monetary policy could continue to be conducted under the regular meeting framework, with no need at present for urgent measures or a special MPC meeting to deal with the currency situation as occurred in Indonesia.
