June 3 (Bloomberg) -- Thailand’s baht posted its biggest weekly gain since April after the central bank raised borrowing costs to tame inflation and signaled more increases are likely.
The Bank of Thailand lifted its one-day bond repurchase rate by a quarter of a percentage point to 3 percent on June 1 as official data showed inflation accelerated to a 32-month high of 4.19 percent in May. Rates remain “low” and the pace of tightening is “still appropriate,” Assistant Governor Paiboon Kittisrikangwan said after the decision. The policy rate will climb to 3.25 percent by year-end, according to the median forecast of 15 analysts in a Bloomberg survey.
“People in the market now predict more rate hikes than previously expected, providing support to the baht,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “However, uncertain factors such as Europe’s sovereign-debt crisis still remain and that makes it hard to see a clear one-way trend for the currency at the moment.”
The baht gained 0.2 percent this week, the most since the five-day period ended April 29, to 30.33 per dollar as of 3:13 p.m. in Bangkok, according to data compiled by Bloomberg. The currency slid 0.1 percent today. It may trade between 30.15 and 30.40 next week, Hasegawa said.
Moody’s Investors Service downgraded Greece’s local- and foreign-currency bond ratings on June 1 and assigned a negative outlook to the ratings.
Thailand’s one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, climbed 17 basis points from a week ago and 1.5 basis points today to 3.23 percent.
Government bonds had a weekly gain, snapping six weeks of losses. The yield on the 3.125 percent notes due December 2015 slid three basis points, or 0.03 percentage point, to 3.43 percent. The rate rose two basis points from yesterday.
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