The local currency fell 0.3% to 32.29 per US dollar on Thursday after touching 32.11 earlier, the strongest since February 2022. The Stock Exchange of Thailand (SET) index slid about 1%, reports the Bangkok Post.
The baht had surged more than 6% this year on growing optimism over trade negotiations, the return of foreign stock inflows and near-record high gold prices.
Thai fighter jets hit two Cambodian army posts near their disputed border on Thursday, as troops clashed in multiple locations in an escalation of tensions between the two nations.
"The escalating border conflict is giving investors a reason to book some gains after the Thai baht has appreciated," said Lloyd Chan, currency strategist at MUFG Bank.
The conflict could put a pause in baht’s rally this year. Sentiment was boosted earlier after Finance Minister Pichai Chunhavajira said on Tuesday the nation is close to an agreement with the US to lower a threatened 36% tariff on its goods ahead of the Aug 1 deadline and expects a rate closer in line with regional neighbours.
The baht’s gain is putting pressure on authorities to curb its strength to protect the nation’s economic drivers of tourism and exports.
"The Bank of Thailand (BoT) will continue to watch for any excessive volatility," said Christopher Wong, senior foreign-exchange strategist at Oversea-Chinese Banking Corporation in Singapore. A break of the resistance level at 32 to 32.1 baht per dollar may add more tailwind to the currency, he said.
Thailand’s foreign-exchange reserves climbed to a record $263 billion earlier in July, partly as officials stepped up their intervention to slow the baht’s appreciation.
Easing tensions between two of Thailand’s largest trade partners — the United States and China — are also soothing investor worries. Global funds have poured a net $345 million into Thai equities in July, on track for the first monthly inflow in 10 months. On Wednesday alone, global funds poured in copy39 million into stocks, the largest single-day inflow in 10 months.
The baht is also underpinned by near-record high gold prices, given the country’s status as a major trading hub for the precious metal in Asia.
IMPACT ON TOURISM
Thailand’s provincial tourism and sports offices have been instructed to report and provide accurate information to tourists regarding the ongoing events, Nattareeya Thaweewong, the permanent secretary for tourism and sports, said on Thursday.
Regarding tourism, Prasat Ta Muen Thom has been officially closed, while Prasat Ta Kwai currently has no tourist activity.
In Sa Kaeo province, the situation along the Thailand-Cambodia border has impacted tourism and trade in the border districts of Aranyaprathet, Ta Phraya and Khlong Hat.
There has been a noticeable decline in tourist numbers and hotel bookings, although other districts remain unaffected.
On Thursday morning, Surin province reported a shooting incident at Prasat Ta Muen Thom, located in Phanom Dong Rak district.
Current security measures include establishing an incident command centre for emergency evacuations in case of an airstrike, situated at the Surin Provincial Government Centre.
Surin governor Chamnan Chuenta has directed residents in Phanom Dong Rak district and surrounding areas to seek shelter in nearby bomb shelters and prepare for evacuation to temporary shelters as outlined in the local evacuation plan.