Increased value of Thai baht is expected to increase or will affect the textile and apparel industry

After easing domestic political pressures, the Thai baht began to strengthen against the U.S. dollar, gradually rising to around 30.70 baht per dollar on September 13 — its highest level in 13 years. Analysts from Taihua Farmers Research Center suggest that the recent rapid appreciation of the baht and its expected continued strength over the next 6–12 months are driven by a strong current account surplus and significant inflows of foreign capital into Thailand’s financial markets. The center predicts that the baht could even reach 30.20 baht per dollar before the end of 2010. However, this trend has raised concerns among businesses, as a stronger baht may negatively impact Thailand’s export competitiveness. According to Taihua Farmers Research Center, the effects of a strong baht on different sectors must be analyzed carefully, as various industries face different challenges depending on their exposure to exports, imports, and international markets. For instance, the U.S. dollar and euro have both weakened significantly against the baht, which affects trade dynamics. Additionally, Thailand’s key competitors, such as Vietnam, China, and India, have seen their currencies depreciate relative to the baht, putting local exporters at a disadvantage. Industries most affected by the baht's appreciation include labor-intensive sectors like textiles, apparel, footwear, leather, and furniture, which already struggle with price competition. The strengthening currency has made it harder for these industries to maintain profitability. Meanwhile, agricultural and food sectors, which rely heavily on domestic raw materials, have also experienced some pressure. However, supply constraints for certain commodities have somewhat mitigated the impact. To cope with the ongoing trend, Taihua Farmers Research Center advises companies to use hedging strategies to manage exchange rate and commodity price risks. This includes selecting appropriate currencies for transactions and exploring new markets to diversify sales channels. In the long term, businesses should focus on enhancing product quality and increasing value-added offerings to reduce reliance on price competition. On the policy front, the government is advised to continue supporting the current trend of the baht while also considering targeted measures to assist businesses. These could include cost-reduction initiatives, accelerated infrastructure development, and increased access to capital goods. Such efforts could help reduce the trade deficit and slow down the pace of the baht’s appreciation.