Baht lags behind peers on concerns over central bank autonomy

Thailand’s currency fell by the most among Asian peers on investor concerns that the independence of the nation’s central bank is being further eroded.
The baht fell more than 1% to 34.739 per US dollar on Tuesday, the weakest since Aug 19, after a panel was said to pick Kittiratt Na-Ranong, a former finance minister and a vocal critic of the central bank’s hawkish monetary policy, as Bank of Thailand’s (BoT) new chairman.
Investors have been questioning the central bank’s independence ever since the government ramped up pressure to cut interest rates and the rumoured appointment “added to investor caution,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “As long as the central bank’s independence is at risk, investors will stay long on dollar-baht.”
The baht has declined more than 7% this quarter in Asia’s worst performance, as Thailand’s government campaigned for the central bank to cut borrowing costs. The outlook has dimmed further as investors grow cautious about emerging assets following Donald Trump’s election victory and expectations of sweeping trade tariffs.
While the BoT chairman does not decide on policy, Mr Kittiratt will have a say in who joins the Monetary Policy Committee (MPC) and can assess the performance of the governor.
“The likely appointment of Mr Kittiratt as the new BoT chairman could have given rise to market expectations for more rate cuts to come next year,” said Lloyd Chan, a currency strategist at MUFG Bank in Singapore. With Thailand one of the most exposed economies in Southeast Asia to Trump’s tariffs, “it’s a double whammy for the Thai baht,” he said.
Mr Kittiratt, a former member of the ruling Pheu Thai Party, was picked as the new chairman at a near five-hour meeting of the selection panel on Monday, according to people familiar with the matter.
While the BoT chairman does not decide on policy, Mr Kittiratt will have a say in who joins the MPC and can assess the performance of the governor. He was nominated by Prime Minister Paetongtarn Shinawatra’s government that has kept on pushing the central bank to cut rates even after it surprised markets last month by lowering borrowing costs for the first time since 2020.
Mr Kittiratt has slammed the monetary authority for not lowering rates to boost growth when he served as an economic adviser to Srettha Thavisin before he was ousted as prime minister earlier this year. When Mr Kittiratt was finance minister in Yingluck Shinawatra’s cabinet in 2013, he also publicly pressured then-central bank chief Prasarn Trairatvorakul to cut rates.