The Thai baht is an important currency for the region of Southeast Asia, due to the prominence of Thailand as a stable regional economy, a top destination for global tourism and an origin for key agricultural and manufacturing exports. The baht is symbolised by ฿ and has a currency code of THB. There is ฿1.455 trillion in circulation, and a volume of approximately US$1.6 billion is traded daily on global foreign exchange markets.
The currency is regulated by the Bank of Thailand, which is the country's central bank. Single bahts are issued as coins. The currency has banknotes of ฿20, ฿50, ฿100, ฿500 and ฿1000, and banknotes feature images of King Chulalongkorn (King Rama) on one side and military and cultural images on the other.
The History Of The Thai Baht
There is evidence that the nation of Thailand has been inhabited since prehistoric times dating to at least 20,000 ago. The currency of the country, the Thai baht, also has a long and storied tradition. Over time, the country saw the evolution of several types of coins with different shapes and markings, including currencies known as leech money, leaf money, pig-mouthed money, flower money and bracelet money.
The first urban societies known in the region were established by the Mon and Khmer people in the ninth-century BC and the Funan state in the first-century A.D. Coins dating back to third-century BC from the Roman Empire and shells and beads used for trade in ancient times have been found in the region. The first metallic coins known to be manufactured locally in the region were introduced by the Funan state from the first century. These were followed by coins of the Dvaravati kingdom between the seventh and 11th centuries.
The Dvaravati kingdom had links to cultures in India and gave origin to the Kingdom of Siam, the name for the nation that was historically located in the region of what is modern-day Thailand. Coins were also produced by the Sri Vijaya Kingdom, which existed from the eighth to the 13th century. The currency that later came to be known as the baht has its origins in the Sukhothai Kingdom in the 13th century, with the coinage of the Pot Duang currency.
Pot Duang coins were handmade metal strips that were folded into spheres in the shape of a bullet, and thus later earned the nickname "bullet currency." The term "baht" is thought to be related to the Sanskrit term "baat," meaning measure or unit of weight. The baht was traditionally based on silver coins of a weight of 15 grams.
The country began to issue standardised coinage and banknotes in the 1850s during the reign of King Rama IV. The Thai currency was initially known in English as the tical. With support from Britain, Thailand established the royal mint for production of its currency. In the 1930s, the Thai government established a National Banking Bureau to deal with banking issues. The nation did not gain a central bank until WWII, however, with the invasion of the Japanese and demands for the creation of a central banking authority.
From its formal launch in the mid-19th century, the baht was based on a standard weight in silver. In 1902, however, the government began to peg the currency to the British pound and a rate starting at ฿21.70 per pound. Briefly, in WWII, Thailand pegged its currency to the Japanese yen at a rate of one to one.
From 1956 to 1997, the Thai government pegged the baht to the US dollar at rates that ranged from ฿20.8 to ฿25 per dollar. From 1997 onward, following the impact of the Asian financial crisis in that year, Thailand opted to allow the baht to float against other currencies.
Monetary policy in Thailand is determined by the Bank of Thailand. The country's interest rate is set by the central bank's seven-member monetary policy committee, which is comprised of three internal members and four external members. Since May 2000, the Bank of Thailand has followed an inflation-targeting policy. In the description of its monetary policy, the bank says that its responsibilities include "maintenance of monetary and financial stability as its primary goal, both of which are necessary in achieving sustainable economic growth over the long run."
The monetary policy committee meets to set interest rates eight times per year at intervals of approximately six weeks. Also in its policy statement, the committee says that it considers "the latest monetary and fiscal data, data about the global economy, and data on domestic production, world oil prices, monetary policy in other countries, as well as world commodity prices, so that the MPC can assess and discuss projections for inflation going forward." For 2015, the Bank of Thailand set an annual inflation target for headline consumer price inflation of 2.5%, with a margin of tolerance of +/-1.5 percentage points.
Economy Of Thailand
Thailand is the world's 22nd-largest economy ranked according to its gross domestic product (GDP). The country is known for well-developed infrastructure and pro-investment policies. It has seen strong employment and attracts large numbers of migrant workers from neighboring countries to meet the demand for labour. The country is known for competitive industry and agriculture, producing exports of electronics, farm commodities, and automobiles and parts.
Approximately 50% of the economy is represented by services and the remainder is represented by agriculture and industry. Major industries include tourism, textiles and garments, agricultural processing, beverages, tobacco, cement and jewelry, among many others. The Thai economy, however, has seen slow growth in recent years due to weak global demand and domestic political turmoil brought by a coup d'état in 2014. The government, nonetheless, has managed to maintain low inflation and a stable local currency. Thailand's top trading partners are the U.S., China, Japan and Malaysia.
Foreign exchange and financial trading in Thailand are regulated by the Securities and Exchange Commission of Thailand, the Capital Market Supervisory Board, the Banks of Thailand, and the Ministry of Finance under the country's Exchange Control Act.
Major Thai Baht Currency Pairs
The baht is commonly traded in pairs with major world and Asian region currencies, including USD, AUD, EUR, GBP and JPY, among others.
Thai Baht Bills And Coins
Since its introduction, the baht has been issued as coins, paper money and plastic polymer money. Thailand's currency is printed under authority of the Bank of Thailand and coins are manufactured at the Royal Thai Mint, which is subordinated to the treasury department at the country's finance ministry. Thai coins known as satang are denominated in values as small as 1/100 of the baht. Coins in current use include 25 and 50 Satang, and ฿1, ฿2, ฿5 and ฿10.
The Thai Baht Around the World
Due to the relative stability of the economy of Thailand and its economic influence in Southeast Asia, the baht is widely accepted for use in the region, especially in Thailand's neighboring countries of Laos, Cambodia, Myanmar, Malaysia and Vietnam. The use of the currency is further promoted by a population of some three to four million foreign migrant workers residing in Thailand.
Starting in the 1990s, the Thai government began to encourage expanded interchange with other countries in the region through what was dubbed the Baht Economic Zone. This influence could possibly widen in the future with the launch of the ASEAN economic community, which includes other important regional trade partners such as the Philippines and Indonesia.
Where Is The Baht Today?
Following WWII, Thailand developed strong ties with Western economies and benefitted from growing investment and international trade. By the 1990s, however, the country had accumulated significant debt and was one of several Southeast Asian nations whose currencies came under speculative attack during the Asian currency crisis of 1997. In July of that year, the country was forced to allow the baht to weaken by more than 20%.
In the wake of the crisis, the country took on US$17 billion in loans under a stabilisation plan led by the International Monetary Fund. In the decade that followed, the country experienced a recovery in stability and growth rates. However, the economic turbulence helped set the stage for increased political turmoil, including coup d'états in 2006 and 2014. In this time, the governments of the country have managed to maintain the baht in relative stability between ฿30 and ฿42 per dollar, but they have also resorted to the use of exchange controls to help prevent excessive volatility.
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Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…