UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya note that the Thai Baht’s rally paused in January as a sharp Gold correction disrupted retail Gold markets and generated two-way FX flows. The Bank of Thailand continues to smooth volatility and scrutinize Gold-linked FX. UOB expects broad Dollar softness and a 25 bps BOT cut to keep USD/THB biased lower, but with a moderated pace of Baht appreciation.

Baht strength seen resuming at slower pace

"On the USD/THB exchange rate, our house view is that the baht’s rally paused in Jan as a historically large correction in gold prices disrupted Thailand’s retail gold market, triggering sizeable two-way FX flows through gold shops and pawn brokers, among others."

"After an 8.2% largely one-directional THB appreciation in 2025 — driven mainly by the currency’s tight linkage with record-high gold prices — this consolidation should be welcomed by policymakers and exporters and is consistent with the BOT’s stated preference for a weaker baht that better reflects Thailand’s underlying fundamentals."

"The BOT has continued to smooth excessive volatility through FX operations while tightening scrutiny of gold-linked FX transactions and online gold-trading platforms The central bank has reiterated that it retains sufficient policy flexibility to manage THB movements despite Thailand’s inclusion on the U.S. Treasury’s currency monitoring list."

"Looking ahead, broad USD softness should keep USD/THB biased lower, but the recent gold-market correction, reinforced administrative measures, and our expectation of an additional 25bps BOT rate cut in 1Q26, should moderate the pace of further THB strength; our USD/THB forecasts are: 31.4 (1Q26), 31.2 (2Q26), and 31.0 (3Q26 and 4Q26)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)