Having a strong buffer in times of stress does pay off. Just look at the baht
The Thai currency has declined 0.3 percent to 32.672 against the dollar in 2018. This is the best performance among 22 major developing-economy currencies tracked by Bloomberg. A current-account surplus and ample foreign-exchange reserves helped offset headwinds from the Federal Reserve’s tightening path and escalating trade tension between the U.S. and China. Thailand has posted current-account surpluses every month since the end of September 2014. As a percentage of gross domestic products, the third-quarter balance of 7.7 percent is among the highest in Asia and compares with Taiwan’s 13 percent. Customs exports also posted gains every month but two in 2017 and 2018, supporting demand for the Thai currency.
Despite some signs of a slowdown, the tourism sector remains a major driver. Exports of goods and services account for about two-thirds of Southeast Asia’s second-largest economy. Foreign reserves are at about US$203 billion, more than twice the amount the International Monetary Fund deems as adequate. Speculation that the Bank of Thailand will deliver its first interest-rate increase since 2011 has also bolstered the baht; the central bank’s monetary policy committee discussed “conditions and appropriate timing to begin normalising monetary policy in the future,” according to the minutes of the Nov. 14 rate decision. A combination of economic recovery and benign inflation was also supportive, with fund inflows to the bond market at $9.2 billion this year through Dec. 11.
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