Thai Baht, Bonds Set for Weekly Advance on Inflows Post Upgrade

Thailand’s baht was poised for its fourth weekly advance and government bonds rose as global funds boosted holdings of local debt after Fitch Ratings raised its assessment of the Southeast Asian nation.

The currency, which touched a 19-month high today, may have strengthened because of rising investor confidence after the rating upgrade and upward revisions of economic forecasts, Bank of Thailand Governor Prasarn Trairatvorakul said March 13, adding the central bank isn’t concerned about the appreciation. Fitch raised its rating on Thailand by one level to BBB+ last week, three levels above junk, citing a resilient economy and a more stable political environment.

“Thailand’s economy is outstandingly solid among the emerging nations, and that attracts investors,” said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co. in Tokyo. “Investors were able to confirm their bullish view with the rating upgrade. Fund inflows are supporting the baht and the bonds.”

The baht appreciated 0.4 percent this week to 29.58 per dollar as of 8:01 a.m. in Bangkok, according to data compiled by Bloomberg. The gain was the biggest since the five days ended Feb. 1. The currency touched 29.53 today, the strongest level since August 2011. It has strengthened 3.4 percent this year, the best performer among Asia’s 11 most active currencies tracked by Bloomberg.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, dropped three basis points, or 0.03 percentage point, to 5.1 percent today. The rate was little changed from a week ago.

Less Intervention

Nomura Holdings Inc. recommended investors buy the baht because of factors including the Bank of Thailand’s view that its monetary policy is still loose. The central bank has proved to be less interventionist in the foreign-exchange market than previously, it said in a note yesterday.

There has been relatively less pressure from exporters to limit the baht’s appreciation as local companies have benefited from a surge in investment, and the impact of the weaker yen on the Thai economy has been limited, according to Nomura. The Japanese currency fell 11 percent this year, the most in Asia.

Prime Minister Yingluck Shinawatra said March 11 the government is targeting an annual growth rate of 4 percent to 5 percent over the long term, after a 6.4 percent expansion in 2012. The Bank of Thailand raised its 2013 growth forecast in January to 4.9 percent from its October prediction of 4.6 percent and signaled it will revise the estimate upwards.

The yield on Thailand’s 3.625 percent government bonds due June 2023 declined three basis points this week and one basis point today to 3.62 percent, the lowest level since Feb. 28, data compiled by Bloomberg show.

Global funds bought $1.6 billion more sovereign notes than they sold in the first four days of this week, more than half the $2.7 billion net purchase for the whole February, according to data from the Thai Bond Market Association.

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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