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Thai Baht Falls as Slowing Inflation Boosts Risk of Intervention

Thailand’s baht, Asia’s best- performing currency this year, fell to a two-week low on speculation slowing inflation will make the central bank more inclined to curb appreciation that threatens exports.

The baht fell 0.3 percent to 29.46 per dollar as of 9:13 a.m. in Bangkok and touched 29.48, the weakest level since March 19, according to data compiled by Bloomberg. It has rallied 3.8 percent this year and touched 29.08 on March 20, the strongest level since 1997. Bank of Thailand Governor Prasarn Trairatvorakul said that day the currency was rising too quickly, while Finance Minister Kittiratt Na-Ranong said a day later that he wanted the baht to weaken.

Consumer prices rose 2.69 percent in March, the least since August, official data showed this week. Currency gains help contain inflation by reducing the costs of imports in local- currency terms.

“With easing inflation for now, it is possible the central bank will be concerned more about the appreciation in the short term,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “But price pressure will continue in the long term and they will probably have to allow for some more appreciation later.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell three basis points, or 0.03 percentage point, to 5.18 percent.

Government bonds were little changed before a central bank policy meeting today at which the one-day bond repurchase rate is expected to be kept at 2.75 percent, according to 20 of 21 economists surveyed by Bloomberg. One forecast a reduction of a quarter of a percentage point. The decision is due around 2:30 p.m. in Bangkok. The monetary authority has held the rate steady since October, when it cut from 3 percent.

The yield on Thailand’s 3.625 percent bonds due June 2023 was 3.53 percent, according to data compiled by Bloomberg. It has averaged 3.63 percent this year.

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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