UPDATE 2-Thai central bank intervenes to rein in currency powered by vaccine hopes

* C.bank says baht strength undermines fragile economic recovery

* Says baht rise has been too fast, hit exporters

* Bank to hold briefing on baht measures on Friday (Edits, adds investment manager quote; paragraph 9)

BANGKOK, Nov 19 (Reuters) – Optimism that a coronavirus vaccine will revive Thailand’s devastated tourist industry has driven up the baht currency so fast that the central bank has been forced to intervene, its governor said on Thursday.

Southeast Asia’s second biggest economy shrank 6.4% in the third quarter after a slump of 12.1% in the preceding quarter.

But news of promising vaccine candidates has boosted hopes for a revival in tourism to swell the current account surplus and lift the currency, said Sethaput Suthiwartnarueput, the governor of the Bank of Thailand.

Already, the currency’s strength has dealt exporters a blow, worsening Thailand’s fragile recovery, he told reporters.

“But the reality is we still don’t know what the result will be… and will tourism really come back?” he added, saying the outcome also hinged on vaccine availability and use.

“What we are concerned about is the currency has already strengthened too fast but there are no tourists yet.”

The baht was trading at 30.39 per U.S. dollar by 0827 GMT, off a more than 10-month high of 30.13 on Monday.

A travel ban imposed in April to curb the outbreak has kept foreign tourists at bay. Last month, Thailand started to let a limited number of foreign visitors return, with quarantine restrictions.

“In terms of flows back in Thailand, it is still early days, but some fast money seem to be getting interested again,” said Nader Naeimi, head of dynamic markets at AMP Capital, referring to hedge funds.

“It’s always darkest before the dawn. It certainly felt pretty dark for Thailand only a few weeks ago.”

Foreign investors have bought $1.1 billion of Thai stocks since Nov. 10 after vaccine progress was announced.

Thailand is not the only country where vaccine optimism has boosted the currency. Chinese state banks have also been active in yuan markets to try to rein their nation’s currency.

Over the past five years, the Bank of Thailand has intervened in the baht markets when appropriate, lifting international reserves by $100 billion, the governor said.

Keeping the policy interest rate at a record low of 0.50% was one step taken to deal with the baht’s strength, Sethaput said.

The central bank will hold a briefing on baht measures and capital movement on Friday, he added. ($1=30.36 baht)

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