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Baht Heads for Best Month Since July 2011 on Capital Inflows

Thailand’s baht headed for the biggest monthly advance since July 2011 as international investors increased holdings of the nation’s assets, while the central bank upgraded its economic growth forecast.

The currency touched a 17-month high in January as global funds pumped more than $4.3 billion into sovereign debt and equities, official data show. The Bank of Thailand said on Jan. 18 that gross domestic product will increase 4.9 percent in 2013, compared with an October estimate of 4.6 percent, citing rising exports, domestic consumption and investment.

“Amid risk-on sentiment in the market, funds have been coming to the region,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “In addition, Thailand’s relatively stronger economic condition attracts more funds, putting appreciation pressure on the baht.”

The baht strengthened 2.7 percent in January, the second- best performance after India’s rupee among Asia’s 11 most-active currencies. It fell 0.1 percent to 29.77 per dollar today as of 9:09 a.m. in Bangkok, according to data compiled by Bloomberg.

The currency touched 29.66 earlier, matching the level touched on Jan. 21 that was the strongest since August 2011. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 151 basis points, or 1.51 percentage points, to 5.42 percent this month, erasing December’s decline. It dropped five basis points today.

A central bank report today may show the current account turned to a deficit of $700 million in December from a surplus of $392 million the previous month, according to the median forecast of economists in a Bloomberg survey before data due at 2:30 p.m. local time.

Trade numbers will also be released. Overseas shipments rose 27 percent in November, compared with 14 percent in October. Exports contracted in seven of the nine months through September.

Government bonds fell this month even after investors added to their holdings. The yield on the 3.625 percent notes maturing in June 2023 rose 20 basis points to 3.74 percent, data compiled by Bloomberg show. The rate was little changed today.

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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