Currency Of Thailand: Political, Economic And Relative Exchange Rate Value Influences
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What form of currency is used in Thailand?
The currency of Thailand is known as the Thai Baht. Thailand enjoys a relatively free economy but has been hit periodically by instability and the Asian Tsunami on December 26th 2004. It also experienced a currency crisis in 1997-98 and again on the 20th December 2006. The crisis in 1997-98 started in May when the currency was hit with massive speculative attacks. The Thai government decided to remove the peg from the US dollar. Thailand was already burdened with foreign debt and the devaluation exacerbated the problem as the devaluation relative to the US dollar resulted in diminished import earnings. This brought a slowdown to the Thai economy and Thai equity markets halved in value. This crisis also spread to other South East Asian economies.
During the later part of 2006, the Thai government introduced measures to try and curb currency speculation because the Thai baht had risen strongly against the US dollar. As the countries largest trading partner, the government was concerned that the rise in the Thai currency exchange rate would result in Thailand’s export becoming uncompetitive on world markets. On the 18th December the Thai central bank announced restrictive controls on speculation on the Thai Baht. Effectively, anyone selling more than $20,000 worth of foreign currency other than for trade purposes was required to deposit 30% of it with the central bank for a period of one year (at a zero percent interest rate) or forfeit one third of the deposit. This had the intended effect of curbing speculation with the Thai baht currency exchange rate dropping over 2%. What they failed to anticipate was the carry over effect which resulted in Thai equity markets retreating as much as 20%.
Economically, Thailand exports 60% of it’s GDP through finished goods such as automobiles, electronic goods, rice, fish products, tapioca, grain, sugar, rubber and coconuts. The economy relies heavily on foreign trade and investment. These industries, particularly agriculture provide employ a high percentage of Thai workers. Tourism is another industry that Thailand relies heavily on. Foreign visitors will have no problem finding an abundance of Thai money exchangers to accept foreign currencies such as the US dollar.
How to invest in the currency of Thailand?
There are currently no exchange traded currency funds or retail deposit products that provide exposure to the Thai currency exchange rate. In the past, Everbank.com had a currency product but this is no longer offered at the time of this writing.
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