Baht Falls on Concern Bank of Thailand to Seek to Curb Inflows

Thailand’s baht dropped the most in more than a week on concern the central bank will seek to curb fund inflows into the nation that have contributed to the currency’s advance this year.

The currency has appreciated 10 percent against the dollar in 2010, Asia’s best performance, as overseas investors bought $1.9 billion more Thai equities than they sold to benefit from the economy’s fastest growth in 15 years. The Bank of Thailand is studying capital-control measures and has intervened in the market to reduce excessive volatility, Governor Prasarn Trairatvorakul said last week. Government bonds fell, sending the five-year yield to the highest level in almost seven months.

“Concern about the capital-control measures is lingering in the market as the baht is still the biggest gainer,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo.

The baht declined 0.5 percent, the most since Nov. 26, to 30.15 per dollar as of 3:29 p.m. in Bangkok, according to data compiled by Bloomberg. It earlier touched 30.20, the weakest level since Dec. 1. The currency may drop to 30.50 by the end of this year, Nishihama said.

Thai government bonds fell for a fifth trading day. The yield on the 3.125 percent debt due December 2015 gained seven basis points to 3.24 percent, the most since May, according to Bloomberg data.

The economy may grow as much as 8 percent this year, which would be the fastest pace since 1995, the central bank predicted on Oct. 28.

China Rates

China’s central bank will raise rates around Dec. 11, when it is scheduled to release the inflation data for November, the China Securities Journal reported yesterday, citing Li Huiyong, an analyst at Shenyin & Wanguo Securities Co.

“If China tightens policy, that’s negative for some Asian countries such as Thailand and Malaysia that rely on exports,” Nishihama said.

China bought about 11 percent of Thai shipments in the first 10 months of this year, official figures show.

Declines in the baht accelerated after Yonhap News reported that North Korea fired artillery shells near the border with South Korea, spurring investors to the relative safety of the dollar. None of the shells crossed the border into South Korean waters and the government is examining the incident, an official at President Lee Myung Bak’s office said.

“The news on North Korea just helped the baht’s decline a bit, but it’s not the main reason,” said Panida Viraphanich, head of trading at TMB Bank Pcl in Bangkok.

The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, added 3.5 basis points to 1.705 percent. A basis point is 0.01 percentage point.

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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