Baht Falls on Concern Central Bank Will Intervene to Stem Gains

Thailand’s baht declined, extending a retreat from near the highest level in almost three weeks, on speculation the central bank will intervene to stem appreciation that may hurt exports.

The currency has dropped so far this year after appreciating 11 percent in 2010, the third-best performance in Asia after the yen and Malaysia’s ringgit. Exports of electronic goods may miss the industry group’s 15 percent growth target for 2011 because of the rising baht, the Bangkok Post reported, citing local producers. Overseas sales account for about two- thirds of the Thai economy.

“There is growing concern about intervention in some countries in the region,” said Minori Uchida, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “Thai exporters seem to have quite a hard time even with the current level of the baht and the authorities may not want to see any sharp appreciation from here.”

The baht lost 0.3 percent to 30.14 per dollar as of 3:31 p.m. in Bangkok, according to data compiled by Bloomberg. The currency reached 29.96 in the offshore market on Jan. 3, its strongest level since Dec. 15.

The nation’s foreign-exchange reserves increased for four straight weeks through Dec. 24 to $170.41 billion, according to central bank data. Bank of Thailand Governor Prasarn Trairatvorakul said in November the central bank has intervened in the market to reduce excessive volatility.

Central banks intervene by arranging sales or purchases of currencies to try to influence exchange rates.

Competition From China

The electronics, electrical and allied industry club of the Federation of Thai Industries now forecasts exports of electronics items will rise 8 percent to 12 percent this year, slowing from an estimated gain of 20 percent for 2010, the English-language newspaper said today.

The stronger baht has cut the competitiveness of Thai products while allowing greater penetration of imported electronics, especially from China, the Bangkok Post reported, citing Supachai Suthipongschai, the club’s chairman.

Government bonds fell. The yield on the 3.125 percent debt due December 2015 rose three basis points to 3.14 percent. A basis point is 0.01 percentage point.

The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, gained 2.5 basis points to 1.825 percent. It yesterday reached 1.85 percent, the most since August 2009.

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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