Baht Near 17-Month High on Fund Inflows; Intervention Risk Seen

Thailand’s baht traded near a 17- month high as overseas investors increased holdings of the nation’s assets, spurred by an improving outlook for Southeast Asia’s second-largest economy. Government bonds were steady.

Global funds bought $3.4 billion more sovereign notes than they sold this month through yesterday and poured a net $409 million into local equities, Thai Bond Market Association and stock exchange data show. The Bank of Thailand raised its 2013 economic growth forecast on Jan. 18 to 4.9 percent from an October estimate of 4.6 percent. Central bank Governor Prasarn Trairatvorakul said yesterday volatile capital flows are the main threat to growth, and the monetary authority is ready to act should there be “unusual movement.”

“With pretty good risk sentiment, funds have been flowing into the region and that is helping boost currencies,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “However, dealers and investors seem sensitive to intervention risks as some central banks in Asia, including Thailand, show concern about rapid appreciation.”

The baht fell 0.1 percent to 29.77 per dollar as of 9 a.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.69 earlier, within 0.1 percent of its strongest level since August 2011 reached on Jan. 21. One-month implied volatility, a measure of expected moves in exchange rates used to price options, declined two basis points, or 0.02 percentage point, to 4.3 percent.

Exports, which account for about two-thirds of Thailand’s economy, climbed 21.5 percent in December after an increase of 27 percent the previous month, according to the median estimate of economists in a Bloomberg survey before a government report due at 3 p.m. local time today.

The yield on the 3.125 percent government bonds due December 2015 was steady at 2.95 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

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

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