Thai Baht Touches Seven-Week High on Prospects of Interest-Rate Increase

Thailand’s baht traded near its strongest level in almost seven weeks on speculation the central bank will boost borrowing costs to tame inflation, increasing the yield premium over developed nations.

The Bank of Thailand may lift the one-day bond repurchase rate by a quarter-percentage point to 2.5 percent tomorrow, according to 14 of 16 economists surveyed by Bloomberg. Two predict no change. The currency was little changed from yesterday on speculation unrest in Libya and the Middle East will reduce demand for higher-yielding emerging-market assets.

“The baht is trying to price in the rate-hike expectation,” said Norawit Suparinayok, a foreign-exchange trader at Bangkok Bank Pcl. “So, it’s possible the baht may test the stronger side today. But uncertainties in the Middle East may create more demand for the dollar as a safe haven.”

The baht traded at 30.44 against the greenback as of 8:25 a.m. in Bangkok compared with 30.43 yesterday, according to data compiled by Bloomberg. It earlier touched 30.38, the strongest level since Jan. 19. The currency may trade between 30.35 and 30.47 today, Norawit said.

The onshore one-year interest-rate swap, the fixed cost needed to receive a floating payment, added 1.5 basis points to 2.725 percent. The yield on the 3.125 percent bond due December 2015 held at 3.42 percent. A basis point is 0.01 percentage point.

The Bank of Thailand raised the policy rate at its last meeting on Jan. 12 by 25 basis points to 2.25 percent, compared with near-zero rates in Japan and the U.S. Consumer prices rose 2.9 percent in February from a year earlier after gaining 3 percent the previous month, official data released on March 1 showed.

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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