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Thai central bank warns off foreign traders as baht rises

A blast against speculators by the Bank of Thailand has put traders on notice that gains for Asia’s best-performing currency this year could slow or even reverse.

The central bank has asked commercial banks to provide more information if they see an “unusually high volume of transfers between non-resident baht accounts which may relate to baht speculation”.

On Tuesday the US dollar rose to 33.265 baht from a 27-month low at 33.182 baht hit on Monday just ahead of the central bank comments.

The dollar has fallen 7.8 per cent against the baht this year to its weakest point in more than two years. The Thai currency has been buoyed by a strong current account as well as the greenback’s widespread weakness that has left all but two of the region’s currencies standing higher for the year so far.

The BoT also said on Monday that it may “consider additional measures to limit the opportunity for baht speculation”.

The news was enough to give Citigroup’s Asian strategy team pause, although the bank maintains a long-term long baht position.

“The risk of more restrictions will probably drive short-term baht underperformance and may lead to a reduction of fixed income exposure,” the bank’s analysts said in a note.

The baht’s strength has led currency analysts to steadily revise higher their forecasts for year-end levels. In January, consensus estimates put the dollar at 36.5 baht by the end of 2017, according to Bloomberg. Currently, analysts forecast the pair at 33.50.

A strong performance by the Thai economy also has bolstered the baht. Second-quarter growth of 3.7 per cent year-on-year was far better than expected by analysts, and was the country’s best rate in four years.

The stabilising of the country’s economy under the military junta, as well as a global pick-up in exports, has produced a rising current account surplus over the past three years — now at 11 per cent of gross domestic product, the second-largest among emerging markets, according to Société Générale.

“The strong momentum in the current account balance is likely to be sustained in coming quarters,” said Amit Agrawal, emerging markets strategist at the bank.

The strong position has allowed the Bank of Thailand to rebuild reserves, which have risen about 13 per cent in the past year to stand at $220bn.