Bloomberg News

Baht Rises Most in 5 Months as Central Banks Act to Help Growth

December 01, 2011

Dec. 1 (Bloomberg) -- Thailand’s baht advanced the most since July after central banks in the region eased their monetary policy to support economic growth.

The currency touched a two-week high as the MSCI Asia- Pacific Index of shares gained for a fourth straight day. The Bank of Thailand yesterday lowered the one-day bond repurchase rate by a quarter of a percentage point to 3.25 percent, its first cut in more than two years, while the People’s Bank of China said reserve ratios at lenders will decline 0.5 percentage points from Dec. 5.

“Central bank actions contributed to gains in stocks and that led to gains in emerging-market currencies,” said Shigehisa Shiroki, chief trader on the Asia and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “We are seeing a risk-on sentiment now although this doesn’t really mean everything would be O.K. from now on.”

The baht climbed 0.9 percent, the biggest gain since July 4, to 30.87 per dollar as of 8:21 a.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 30.85 earlier, the strongest level since Nov. 17. It may strengthen to around 30.50 before year-end, Shiroki said.

The baht may also draw support from speculation overseas reinsurers honoring claims by local underwriters on the nation’s worst floods in 70 years will send funds, Mizuho’s Shiroki said. “We will probably see some baht demand from reinsurers and the baht may see slight upward pressure toward the year-end,” he said.

Fund inflows in preparation for insurance claims linked to the floods may affect the baht, Bank of Thailand Assistant Governor Pongpen Ruengvirayudh said on Nov. 14.

The yield on the 3.25 percent debt due June 2017 was unchanged at 3.3 percent, according to data compiled by Bloomberg.

--Editors: Sandy Hendry, Andrew Janes

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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