Baht Climbs to Highest Since 1997, Bonds Advance on Fund Inflows

Thailand’s baht rose to its strongest level since July 1997 and government bonds advanced for a seventh day as the nation’s improving economy attracts overseas capital.

The baht’s gains are being driven by the inflows, Bank of Thailand Governor Prasarn Trairatvorakul said yesterday, adding that the central bank will closely monitor the currency, which has seen the biggest advance in Asia this year. Global funds bought $2.4 billion more sovereign debt than they sold this month through yesterday after net purchases of $2.7 billion in February and $3.7 billion in January, data from the Thai Bond Market Association show.

“The economy is very solid and the central bank seems to be quite tolerant with the baht’s gains,” said Kozo Hasegawa, a foreign-exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. “But because the pace of appreciation was so fast, the tolerance doesn’t mean they won’t intervene at all, and we may see some correction soon.”

The baht climbed 0.5 percent to 29.18 per dollar as of 9:30 a.m. in Bangkok and has strengthened 4.8 percent this year, according to data compiled by Bloomberg. It earlier touched the 1997 high of 29.15 and advanced 0.8 percent yesterday, the biggest gain since Jan. 2.

Bond Sales

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped six basis points, or 0.06 percentage point, to 4.81 percent, the lowest since Jan. 24.

Prime Minister Yingluck Shinawatra said March 11 that the government is targeting annual economic growth 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 forecast in January to 4.9 percent from an October prediction of 4.6 percent and signaled it will revise the estimate higher.

The government will sell 14 billion baht ($480 million) of bonds due in 2019 and 6 billion baht of securities maturing in 2061 today, its debt sale calendar shows. The yield on 3.625 percent notes due June 2023 declined one basis point to 3.58 percent, the lowest level since Feb. 11, 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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