The currency climbed to a 17-month high and the central bank said this week recent gains were being driven by capital inflows into the region. Global funds purchased $2.3 billion more of Thailand’s sovereign debt than they sold this month through yesterday and poured a net $274 million into local equities, stock exchange and Thai Bond Market Association data show. The nation’s 10-year debt yields 3.7 percent, compared with 1.83 percent in the U.S. and 0.75 percent in Japan.
“There’s a pretty strong momentum on the baht with a good amount of fund inflows,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Compared with developed nations, Thai yields are still higher and investors can also aim to profit from the currency gains.”
The baht climbed 0.3 percent to 29.75 per dollar as of 9:44 a.m. in Bangkok and touched 29.72, the strongest level since August 2011, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped five basis points, or 0.05 percentage point, to 4.25 percent.
The Bank of Thailand isn’t concerned by the baht’s strength as it stems from risk-on sentiment and moves have been in line with regional currencies, Governor Prasarn Trairatvorakul said Jan. 14. The baht has appreciated 6.9 percent versus the greenback in the past 12 months, Asia’s third-best performance. South Korea’s won climbed 8.1 percent and the Philippine peso advanced 7.4 percent.
Investors should simultaneously buy the baht and sell the Singapore dollar given fund inflows into Thailand, Oversea- Chinese Banking Corp Ltd., the top forecaster of Asian currencies based on data compiled by Bloomberg, said this week. HSBC Holdings Plc also recommended clients use the Singapore dollar as a funding currency in Asia and purchase the baht in a report on Jan. 15, citing the current-account surplus.
Thailand, Southeast Asia’s second-largest economy, reported a current-account excess of $392 million for November, compared with a deficit of $199 million the previous month, official data show. Singapore’s five-year bonds yield 0.31 percent, lower than Thailand’s 3.27 percent.
“The baht may remain underpinned by investor inflows, particularly given the nascent improvement in Thailand’s current-account balance and the central bank’s relative comfort with the currency’s recent rise,” Emmanuel Ng, a Singapore- based strategist at OCBC, said.
Capital inflows totaling several billion baht been recorded in Thailand’s bond market this week, mostly in short-term securities, Niwat Kanjanaphoomin, President of the Thai Bond Market Association, told reporters yesterday.
The yield on the 3.125 percent government bonds due December 2015 was little changed today at 2.94 percent, data compiled by Bloomberg show. The benchmark three-year yield climbed as high as 3.50 percent in 2012.
To contact the reporter on this story: Yumi Teso in Bangkok at firstname.lastname@example.org