Bloomberg News

Thai Baht Snaps Two-Day Advance as Fed Minutes Deter Risk-Taking

February 20, 2013

Thailand’s baht halted a two-day advance after Federal Reserve minutes showed there is a debate over monetary easing in the world’s largest economy, damping demand for emerging-market assets.

Fed policy makers are divided about continuing with $85 billion a month of debt purchases, according to minutes of a Jan. 29-30 meeting released yesterday. The Dollar Index (DXY), which tracks the greenback against the currencies of six major trading partners, climbed by the most since July 2012 yesterday. The Bank of Thailand said it will closely monitor capital flows and take action if needed after keeping its policy rate unchanged at 2.75 percent on Feb. 20.

“A debate over the end of quantitative easing boosted the dollar across the board,” said Tsutomu Soma, fixed-income business unit manager at Rakuten Securities Inc. in Tokyo. “There has been some concern about the intervention in the region.”

The baht declined 0.1 percent to 29.87 per dollar as of 8:35 a.m. in Bangkok, according to data compiled by Bloomberg. The currency has strengthened 2.3 percent this year, the best performance in Asia. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 5.25 percent.

Global funds purchased $1.7 billion more sovereign notes than they sold this month, according to the Thai Bond Market Association.

The yield on the 3.625 percent government bonds due June 2023 rose one basis point, or 0.01 percentage point, to 3.64 percent, data compiled by Bloomberg show.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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