Baht Advances a Second Day on Optimism Capital Inflows Will Rise

Thailand’s baht rose for a second day on optimism the nation’s improving economy and relatively high bond yields will draw overseas capital.

The currency appreciated 2.7 percent this month, the best exchange-rate performance in Asia, as international investors poured more than $4 billion into local stocks and sovereign bonds, official data show. The Bank of Thailand raised its 2013 growth forecast on Jan. 18 to 4.9 percent from an October estimate of 4.6 percent. Benchmark 10-year government notes pay 3.71 percent in Thailand, compared with 2 percent in the U.S. and 0.77 percent in Japan.

“Investors have been pouring money into Asia where yields are higher and economic conditions are solid, contributing to appreciation pressures on currencies,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Domestic demand in Thailand may lead to some inflationary pressure and there’s speculation the central bank is a bit more accommodative to currency gains to help curb inflation.”

The baht climbed 0.2 percent to 29.79 per dollar as of 8:24 a.m. in Bangkok, according to data compiled by Bloomberg. It touched 29.66 on Jan. 21, the strongest since August 2011. 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 5.42 percent.

Inflation accelerated to 3.63 percent in December, the fastest in 13 months, government figures showed Jan. 2. Finance Minister Kittiratt Na-Ranong said last week the central bank should avoid fighting market forces to stem currency gains.

The yield on the 5.125 percent government bonds due March 2018 was little changed at 3.3 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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.