Baht Has Weekly Decline as Importers Buy Dollars; Bonds Drop

Thailand’s baht had the biggest weekly loss this year on speculation importers are stepping up purchases of the dollar to take advantage of a more favorable exchange rate. Bonds dropped.

The currency touched a five-week high of 30.68 per dollar on May 2 before losing 0.5 percent that day. Imports climbed 25.6 percent in March, the most since September, as companies replaced machinery damaged in last year’s floods, customs data showed last week. That contributed to a record $4.59 billion trade deficit. The baht has traded between 30.68 and 31.07 against the greenback since March 28.

“With the baht reaching the top of its recent trading range, importers wanted to buy dollars but exporters seem to be on the sidelines waiting for the 31 level,” said Kozo Hasegawa, a Bangkok-based trader at Sumitomo Mitsui Banking Corp. “Declines in the baht were limited as we were seeing some fund inflows.”

The baht dropped 0.6 percent this week and 0.1 percent today to 30.96 per dollar as of 3:14 p.m. in Bangkok, according to data compiled by Bloomberg. It may trade between 30.75 and 31.05 next week, Hasegawa said. One-month implied volatility, a measure of foreign-exchange swings used to price options, was unchanged today and this week at 4.52 percent.

Global funds bought $54 million more local shares than they sold this week through yesterday and a net $859 million of government debt, according to data from the stock exchange and the Thai Bond Market Association.

No More Cut

The yield on Thailand’s 3.25 percent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.58 percent today, according to data compiled by Bloomberg. The rate advanced one basis point this week.

Thailand will refrain from further interest-rate reductions the economy is recovering from the floods faster than the central bank anticipated, Governor Prasarn Trairatvorakul said. The central bank kept its benchmark interest rate unchanged at 3 percent for a second straight meeting on May 2, after two reductions.

Southeast Asia’s second-largest economy will probably expand 6 percent this year, up from a previous estimate of 5.7 percent and a 0.1 percent expansion in 2011, Prasarn said in an interview with Bloomberg News in Manila today, where he is attending Asian Development Bank meetings.

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.