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Baht Gains on Speculation Central Bank to Raise Interest Rates

Thailand’s baht rose for a sixth day on speculation the central bank will raise borrowing costs this week to tame inflation, increasing the yield advantage on the nation’s assets.

The currency touched a six-week high ahead of the Bank of Thailand’s meeting to review its benchmark interest rate on March 9. Fourteen of 16 economists surveyed by Bloomberg expect the central bank to lift its policy rate by a quarter percentage point to 2.50 percent and two predict no change. The MSCI Asia- Pacific Index of regional stocks fell as oil prices rose to $106.13, near the highest level in 29 months.

“The baht has got support from the rate-hike speculation as its economy is quite solid,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “But rising oil prices pose a threat to global economic growth and drops in stocks cut risk appetite among investors, weighing on the Asian currencies. So, there is no strong momentum for the baht to see a sharp one-way move upward at this moment.”

The baht rose 0.1 percent to 30.44 per dollar as of 3:51 p.m. in Bangkok, according to data compiled by Bloomberg. It earlier touched 30.42, the strongest level since Jan. 19. The currency may trade between 30.20 and 30.70 through the end of this month, Hayashi said.

The onshore one-year interest-rate swap, the fixed cost needed to receive a floating payment, fell three basis points to 2.695 percent. A basis point is 0.01 percentage point.

The Bank of Thailand lifted the policy rate at its last meeting on Jan. 12 by 25 basis points to 2.25 percent and signaled further increases. Consumer prices rose 2.87 percent in February from a year earlier after gaining 3.03 percent the previous month, official data released on March 1 showed.

Government bonds were unchanged. The yield on the 3.125 percent debt due December 2015 held at 3.42 percent.

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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