THE THAI BAHT’S reign as Asia’s best-performing currency is coming under threat from an unlikely source: South Korea’s won.

The baht has slumped into the bottom half of the regional rankings this quarter after heading the table for three consecutive three-month periods. The won meanwhile has shrugged off its chronic underperformance and rocketed to the top.

The main reason behind the Korean currency’s revival has been the sea-change in sentiment surrounding US-China trade tensions. After the dispute between the world’s two-largest economies heightened through the early part of year, recent rhetoric suggests a phase-one deal is getting closer.

This has been a big fillip to the won as the two countries are by far the largest buyers of South Korea exports. The won has strengthened 2.5% against the dollar this quarter after sliding 6.7% during the first nine months of the year.

The won is also being supported by a brace of domestic factors. Industrial production growth for September was four times the median estimate of economists, while semiconductor inventories for the same month dropped the most in two years, suggesting a prolonged slump in tech demand may be easing. The won may get a further boost if trade data on Thursday backs up these green shoots.

The baht has tumbled down the regional rankings after Bank of Thailand stepped up measures to cap the currency’s strength. Policy makers cut interest rates for the second time in three months on Nov. 6, lowering the benchmark to match an all-time low 1.25%. They also said they would ease rules on outflows to curb the surging currency.

Measures taking effect Nov. 8 included allowing exporters to keep a larger amount of money abroad, and scrapping most restrictions on outward transfers. The Bank of Thailand will review these policies every three months and take further steps if needed, Deputy Governor Mathee Supapongse said.

While still eking out a modest gain versus the greenback this quarter, the baht has dropped 0.4% from a six-year high set in late October. The currency may remain under pressure Monday as a report is forecast to show economic growth virtually stalled in the third quarter.

The baht-won cross — a synthetic exchange rate calculated from the level of the two currencies against the dollar — has dropped 3.4% from its August high. The pair has broken below an uptrend that has held since the start of the year and there’s every chance its recent losses may be just the start of longer decline. — Bloomberg