Foreign Exchange Market

‘Foreign exchange market’ is a market for trading and exchanging any pair of currencies. The value (price) of one currency in terms of another currency is known as ‘foreign exchange rate’ e.g. the exchange rate between Thai Baht (THB) and US Dollar (USD), and the exchange rate between Thai Baht and Chinese Renminbi (RMB). The exchange rate movements are determined by demand and supply for the currencies over time. Such demand and supply are derived from international trade value, international capital flows and market’s expectation.

Thailand has adopted the managed float exchange rate regime since July 2, 1997. The Bank of Thailand (BOT) has implemented the foreign exchange management framework that aim to maintain its stability. The BOT does not target the exchange rate at any specific level, but monitors and oversees the exchange rate movements to be in line with economic fundamentals and not too volatile as it might deter economic sector adjustment and cause severe adverse impacts on the economy.