Thai Baht Gains on Speculation of U.S. Stimulus, ECB Bond Buying

Thailand’s baht strengthened for the fourth time in five days amid speculation the U.S. plans further monetary easing and Europe will bolster efforts to resolve a regional debt crisis.

The MSCI Asia Pacific Index (MXAP) of stocks rose the most in two weeks before a European Central Bank meeting at which details of a bond-buying plan may be announced. The U.S may report tomorrow payrolls grew at a slower pace in August, adding to the case for the Federal Reserve to begin a third round of asset purchases, or quantitative easing. The Bank of Thailand kept its benchmark interest rate unchanged yesterday, resisting calls from the government to reduce borrowing costs.

“What’s driving the baht and other Asian currencies is expectations of more stimulus measures from the U.S. and stabilization in Europe,” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale SA in Hong Kong. “The Bank of Thailand’s decision to hold its policy rate was mildly supportive.”

The baht climbed 0.2 percent to 31.21 per dollar as of 4:21 p.m. in Bangkok, contributing to a 0.5 percent advance for the past week, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 4.27 percent.

Ten-year government notes fell for a third day. The yield on the 3.65 percent bond due December 2021 rose three basis points, or 0.03 percentage point, to 3.42 percent, according to data compiled by Bloomberg. That’s the highest level since Aug. 22.

Rate Unchanged

The Bank of Thailand kept its benchmark interest rate at 3 percent for a fifth straight meeting yesterday, a decision predicted by 18 of 21 analysts in a Bloomberg survey. Three forecast a 25 basis point cut. Global funds bought $39 million more Thai equities than they sold in the first three days of this week, exchange data show.

U.S. payrolls probably increased by 127,000 last month, less than the 163,000 jobs added in July, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department report due Sept. 7. Thai exports to the U.S. amounted to $1.96 billion in July, about 10 percent of total shipments, official figures show.

Federal Reserve Chairman Ben S. Bernanke said Aug. 31 that U.S. joblessness was a “grave concern” and further monetary easing can’t be ruled out. European Central Bank President Mario Draghi will today unveil a proposal that involves unlimited purchases of government debt, two central bank officials said yesterday on condition of anonymity.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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