Baht alarm bells: Thailand’s central bank warns the currency is surging dangerously, pushes the government for stronger powers over gold trading and capital flows as exports, tourism and the wider economy come under growing strain despite rate cuts.
The Bank of Thailand’s new governor, Vitai Ratanakorn, is pressing the government to strengthen the central bank’s powers over gold trading regulation in Thailand, saying stronger authority is needed to demand transaction reports, as a blind spot exists around large flows of funds moving from the US dollar into gold and the baht. The sharp rise in the baht’s value in 2025 has been driven partly by US dollar weakness and international capital seeking a safe haven, while year-end seasonal factors typically lift the currency, yet the baht has still surged 2.5% in December alone despite an interest rate cut announced on Wednesday.
The Bank of Thailand has intensified efforts to contain the baht after a sharp and persistent appreciation. As a result, currency management has become a central policy issue. Governor Vitai Ratanakorn has led the response, arguing that existing tools are no longer sufficient to manage current market pressures.
Consequently, he has urged the Ministry of Finance to grant the central bank stronger legal powers over the foreign exchange market. In addition, he has called for expanded authority over gold trading conducted within Thailand.
Specifically, the Bank of Thailand is seeking stricter reporting requirements for foreign exchange transactions. At the same time, it is proposing the creation of a dedicated government agency to oversee the gold trade.
Rapid expansion of gold trading and industry warnings intensify concerns over baht volatility
Notably, gold trading has expanded rapidly in recent years, particularly through online platforms. As a result, transaction volumes have increased significantly, amplifying movements in the baht. Therefore, officials now view gold trading as a structural factor in currency volatility.
Meanwhile, industry leaders have publicly reinforced the central bank’s concerns. On Wednesday, Federation of Thai Industries chairman Kriengkrai Thiennukul warned that exporters and tourism operators have suffered throughout 2025.
According to Mr Kriengkrai, the baht is clearly overvalued relative to Thailand’s economic fundamentals. Consequently, export margins have narrowed, while tourism competitiveness has weakened. Moreover, he said the damage has intensified as the currency continued to strengthen.
At the same time, authorities have raised concerns about illicit financial activity. In particular, there is a deep-seated fear that Thailand is being used as a conduit for money laundering. Officials believe such activity may occur through gold trading and related financial channels. Moreover, these inflows may not be linked to normal business operations or personal transfers. As a result, they may be distorting foreign exchange markets.
Illicit fund fears rise as officials warn gold trading channels may distort foreign exchange market behaviour
In parallel, the baht has attracted strong international capital inflows. This appeal has been reinforced by Thailand’s large and stable foreign currency reserves. Consequently, global investors seeking alternative destinations have directed funds into baht assets. In turn, these inflows have added upward pressure to the currency during periods of global uncertainty.
Against this backdrop, pressure has grown to weaken the baht more decisively. Accordingly, some economists have suggested a Thai quantitative easing programme. They point to similar measures used in the United States, the United Kingdom, and Europe.
Such programmes boosted liquidity and weakened currencies in those markets. Previously, reports indicated that the last Pheu Thai–led government was preparing for such a move. However, officials noted that this approach would require strong political backing.
For now, the Bank of Thailand has focused on immediate market controls. In particular, it has tightened oversight of dollar-denominated gold trading transactions. This action followed evidence that gold-related foreign exchange activity had surged.
Central bank turns to immediate market controls as gold-related dollar transactions surge sharply
At times, such transactions accounted for as much as 20% of total foreign exchange market volume. Consequently, officials identified gold trading as a major contributor to baht volatility.
Earlier this month, Governor Vitai ordered stricter scrutiny of dollar-selling transactions. Specifically, commercial banks were instructed to rigorously verify documentation linked to gold businesses.
As a result, compliance standards have been raised across the banking system. Moreover, banks are now required to closely monitor all foreign exchange inflows. The stated aim is to prevent undesirable or non-business-related funds from entering Thailand.
In addition, the central bank is seeking expanded authority from the Ministry of Finance. Specifically, it wants the legal power to request detailed foreign exchange transaction data from major gold traders.
According to Governor Vitai, such data is essential for effective supervision. At certain times, gold trading accounts for one-fifth of market activity. Therefore, its influence on exchange rate movements is significant.
Regulators debate gold sector oversight as online trading platforms amplify baht volatility pressures
Meanwhile, the Bank of Thailand and the Ministry of Finance are discussing regulatory oversight of the gold sector. In particular, they are considering which government agency should supervise gold trading.
Attention has focused on online trading platforms. These platforms now handle much larger transaction sizes than in the past. Consequently, their impact on baht volatility has become more pronounced.
Furthermore, the central bank has launched investigations into foreign currency conversions. Specifically, it is examining cases where foreign currency is sold to purchase baht. The focus is on identifying inflows that lack a clear economic justification. As a result, commercial banks are required to apply stricter monitoring standards. Officials have said enforcement will be firm.
These measures come as the baht reached a fresh four-year high earlier this week. On Monday, it touched its strongest level since 2021. By Tuesday afternoon, it stood at 31.52 to the US dollar. Overall, the currency has appreciated by 2.5% since the beginning of December. Governor Vitai attributed much of this rise to a weakening US dollar. However, domestic factors have also played a significant role.
Seasonal inflows and investment gains reinforce baht’s strength despite mounting intervention signals
For example, year-end seasonal effects have boosted capital inflows. Tourism receipts have increased as travel activity recovered. Export earnings have also risen. In addition, foreign investment has flowed into Thai equities and bonds. At the same time, gold traders have increased dollar sales. These proceeds are typically converted into baht, further strengthening the currency.
Earlier, caretaker finance minister Ekniti Nitithanprapas described the baht as excessively strong. He said the currency had appreciated beyond what Thailand’s economic structure can accommodate. According to him, net exports have been a key driver of the rise. Nevertheless, the pace of appreciation has raised concerns across policy circles.
Despite intervention signals, the baht has remained firm. On Thursday, it strengthened further following a Bank of Thailand rate cut. Normally, such a move would weaken the currency. Instead, the baht continued to rise, highlighting the strength of capital inflows. This development highlighted the limits of interest rate policy alone.
Gold trading role disputed as economists and industry leaders diverge on causes of baht appreciation
Governor Vitai said gold trading plays a structural role in the currency market. When Thai investors sell gold, proceeds are often received in US dollars. These dollars are then converted into baht. As a result, demand for the local currency increases. Consequently, gold trading can amplify upward pressure during periods of heavy activity.
However, representatives of the gold industry have disputed this assessment. Thailand Gold Traders Association president Jitti Tangsithpakdi said trading has been sluggish since October. He noted that gold prices reached a record high of $4,381 an ounce before falling below $4,300. As a result, traders and buyers became more cautious. Therefore, he said gold trading is unlikely to be the main driver of the baht’s recent surge.
Economists remain divided on the outlook. Siam Commercial Bank chief economist Yunyong Thaicharoen expects further appreciation in the near term. He said the baht may remain strong through the first quarter of next year. However, he expects a weakening in the second half of 2026. This shift would coincide with the end of the US easing cycle, drawing capital back to the United States.
Rate cut expectations and communication risks shape outlook as exporters warn of sustained baht choke
Similarly, Asia Plus Securities executive vice-president Therdsak Thaveeteeratham highlighted the role of monetary policy. He predicted the baht could weaken if the Bank of Thailand cuts the policy rate by 25 basis points. Wednesday’s cut brought the rate to 1.25%. Market expectations largely aligned with this view. However, the baht was even stronger at the close of business on Thursday. Certainly, this suggests an invisible hand or factor is at work.
Kasikorn Research Centre’s Kanjana Chockpisansin emphasised communication risks. She suggested the committee’s tone will be critical. If policymakers signal heightened concern about the economic outlook, the baht could have retreated from its four-and-a-half-year high.
Again, despite the confidence of top analysts, this has not happened, at least in the shorter term. The US dollar ended the day at ฿31.46. The Thai currency actually gained marginally after the rate cut.
Meanwhile, the Federation of Thai Industries has sharpened its warnings. Mr Kriengkrai said the baht has strengthened by more than 8%, marking the fastest rise in many years. Previously, it had gained 5.77% in the prior month. Together, these moves represent sustained upward pressure. Consequently, exporters and tourism operators have faced growing strain. In effect, a choke on growth.
He compared Thailand’s currency performance with regional peers. Vietnam’s dong has appreciated by more than 3%. China’s yuan has risen by about 7%. Both increases lag behind the baht’s recent gains. Moreover, he cited psychological factors. Signals from the US Federal Reserve pointing to a 0.25% rate cut intensified volatility.
Business leaders back tighter controls as concerns deepen over illicit inflows and limited policy effectiveness
Accordingly, he welcomed the Bank of Thailand’s tighter document checks. He described them as targeted and necessary. The measures cover bank accounts, money transfers, and gold transactions. However, he stressed they represent only an initial step. He said multiple forces may be driving the baht’s appreciation.
Most importantly, Mr Kriengkrai raised concerns about illicit funds. He warned that grey money and scam proceeds may be flowing into Thailand. The scale of these flows remains unclear. Nevertheless, such inflows could distort currency markets. Therefore, he urged authorities to conduct deeper and more coordinated investigations.
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Earlier warnings support this stance. The Joint Committee of Private Sector Organisations raised similar concerns earlier in 2025. Those warnings prompted earlier inquiries by the Bank of Thailand. Now, the issue has returned with greater urgency. Capital flows are larger, and gold trading volumes are higher.
In response, the Bank of Thailand has escalated oversight across markets. It has tightened controls, expanded monitoring, and demanded more data. For now, officials say stabilisation is the priority. Exchange rate volatility remains elevated. Consequently, the baht remains under close and sustained watch.
Thailand’s economy has been left reeling from a falloff in foreign tourism this year. In addition, its export concerns face an uphill battle with tougher trade conditions.
These pressures are all aggravated by the sky-high value of the Thai currency. Meanwhile, the country’s domestic economy is labouring under a tightening of credit and a lack of liquidity.
In short, the time for robust action to tackle the baht’s stubbornly high value, which goes against the grain of economic fundamentals, has come.
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