Gains in Thailand’s baht stalled near a 17-month high on speculation the central bank will intervene to slow the pace of appreciation to protect exports. Government bonds advanced for a sixth day on fund inflows.
The benchmark 10-year yield dropped to a one-month low after overseas investors bought $1.4 billion more sovereign debt than they sold this month through yesterday, Thai Bond Market Association data show. Finance Minister Kittiratt Na-Ranong said this week that he wrote to the Bank of Thailand, reiterating his view that the Thai benchmark rate is luring capital inflows. The currency of Japan, Thailand’s second-largest export market, touched a May 2010 low against the dollar yesterday.
“The baht is just stalling and hovering in a tight range on intervention concern,” said Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA. “The baht gets support from speculation the weaker yen supports Japan’s economy, which may help Thailand’s exports.”
The baht was unchanged from yesterday at 29.78 per dollar as of 3:07 p.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.66 on Jan. 21 and Jan. 31, the strongest level since August 2011.
The yield on the government’s 3.625 percent bonds maturing in June 2023 declined three basis points, or 0.03 percentage point, to 3.58 percent, the lowest level since Dec. 28, data compiled by Bloomberg show.
The Southeast Asian nation’s policy rate is 2.75 percent, compared with a maximum of 0.25 percent in the U.S. and 0.1 percent in Japan. The central bank will next meet to review monetary policy on Feb. 20.
The central bank will raise its benchmark interest rate to 3.5 percent this year to curb inflation, Ed Teather, Singapore-based senior economist for Southeast Asia at UBS AG said today. The baht may rise to 27 per dollar, he added.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 5.5 percent.
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